Domestic shares ended at a record closing high, after government data last week showed that consumer inflation in April eased to its lowest in at least five years, reviving a debate on whether the central bank should cut interest rates.
The benchmark BSE Sensex closed at a new peak of 30,322.12, up by 133.97 points or 0.44 per cent and the NSE index Nifty closed higher by 44.50 points or 0.47 per cent at a record 9,445.40.
Among BSE sectoral indices, metal index gained the most by 2.4 per cent, followed by healthcare 1.06 per cent, realty 0.94 per cent and banking 0.82 per cent. On the other hand, TECk index was down 0.46 per cent, IT 0.41 per cent and consumer durables 0.08 per cent.
Top five Sensex gainers were Tata Steel (+4.35), Dr Reddy's (+3.54%), Lupin (+2.4%), ICICI Bank (+1.82%) and Asian Paints (+1.32%), while the major losers were Infosys (-1.24%), Hero MotoCorp (-0.9%), Adani Ports (-0.53%), Reliance (0-0.53%) and Axis Bank (-0.52%).
FII inflows
The rupee rose to 64.0275 per dollar, its strongest since April 27, on expectations of additional foreign portfolio inflows into Indian markets.
The rally came after data late on Friday showed consumer prices rose by an annual 2.99 per cent, compared with 3.89 per cent in March, extending a debate about whether the Reserve Bank of India is being too hawkish on inflation.
Hopes for easing inflation got a further boost after the domestic weather office said on Sunday monsoon rains had reached the country's Andaman and Nicobar islands ahead of the schedule.
The Reseve Bank of India had stunned markets in February by changing its policy stance to “neutral” from “accommodative” and issuing a statement at its last policy meeting in April that was widely seen as hawkish.
Most analysts still expect the RBI to hold rates steady this year, although the inflation data and prospects of higher-than-expected monsoon rains are fuelling calls for the central bank to cut rates. The next policy meeting is set for June 6.
“The sharp pullback in April CPI inflation raises doubts on the central bank's cautious policy outlook,” Radhika Rao, an economist for DBS Bank in Singapore, said in an email to clients.
“Eyes are next on the June RBI review. An about-turn in policy is unlikely but policy guidance will be more neutral and balanced than April.”
Inflation, IIP data
The government had on Friday launched the updated series of data for the Index of Industrial Production (IIP) and Wholesale Price Index (WPI)-based inflation, which registered healthier factory output and lower price pressures.
But measured by the old series, factory output was lower at 2.5 per cent in March and had contracted by 1.2 per cent in February. Likewise, the IIP annual growth in 2016-17 under the new series is 5 per cent against 0.7 per cent under the old series.
Despite a sharp rise in fuel prices, WPI inflation under the new series eased to 3.85 per cent in April from 5.3 per cent in March. Similarly, Consumer Price Index (CPI)-based inflation eased to 2.99 per cent in April, from 3.89 per cent in March, due to lower cost of food items.
Asian shares
Asian stocks got off to a shaky start as a ransomware attack that locked up more than 200,000 computers in over 150 countries and a missile test by North Korea on Sunday kept investors on edge.
MSCI's broadest index of Asia-Pacific shares outside Japan was little changed. Japan's Nikkei retreated 0.3 per cent on a stronger yen. Australian shares fell 0.2 per cent, while South Korea's KOSPI was little changed.