Domestic markets are likely to open on a flat to positive note despite Reliance Industries’ underwhelming performance. Analysts expect the consolidation phase to continue with stock-specific action during the result season. The inflation numbers are slightly above expectations. Strong numbers by HCL Technologies will help IT stocks, said analysts.

Headline inflation for September rose sharply to 5.49% YoY, primarily due to a higher-than-expected sequential rise in food inflation (1.2% MoM), particularly in vegetables, eggs, and oils & fats, as well as an unfavourable base effect. Core inflation also ticked up (3.6% YoY) mainly due to higher gold prices. October CPI is tracking ~5.3% as food prices continued to rise. Although a healthy kharif harvest is expected to ease elevated food inflation from Q3 onwards, unseasonal rains are already causing crop damage and posing an upside risk to food inflation. While we see core inflation averaging ~3.6% in FY25E and remaining below 4% till end-CY24, the FY25E headline inflation is now forecasted at ~4.7%, 15-20bps higher than the RBI’s forecast. Various domestic and global push-and-pull factors are weighing on the RBI, and higher global volatility could mean that the aim of financial stability may precede inflation management,” said Madhavi Arora of Emkay Global Financial.

Aditi Nayar, Chief Economist and head of Research and Outreach, ICRA Ltd, said: With the dissipation of the favourable base, the CPI inflation surged to a 9-month high of 5.5% in September 2024 from 3.7% in August 2024. Inflation in the food and beverages sub-group rose sharply to 8.4% from 5.3% in the previous month, accounting for as much as 142 bps of the 183 bps uptick in the headline print between these months.

Meanwhile, Gift Nifty at 25,240 signals a gain of about 20 points for the Nifty at open. Global stocks, led by Nikkei, were up in the early deal on Tuesday.

Traders will react to the results of heavyweights like Reliance and HCL Tech in early Tuesday trades. A recovery in major banking stocks, along with continued strength in IT, could drive further gains. However, the Nifty faces resistance at the 25,300 level. Traders are advised to maintain a stock-specific approach and consider hedged strategies, said Ajit Mishra – SVP, Research, Religare Broking Ltd.

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