India equity benchmarks rise as soft inflation data fuels RBI rate cut bets

MUMBAI: India’s equity benchmarks snapped a four-session losing streak on Tuesday, as lower-than-expected domestic inflation data boosted expectations of further rate cuts this year by the central bank.

The Nifty 50 closed 0.45% higher at 25,195.80 points and the BSE Sensex added 0.39% to 82,570.91.

The blue-chip indexes fell 1.7% in the past four sessions. All the 13 major sectors rose on the day. The broader mid- and small-caps added about 1% each.

The short-term outlook of the domestic equity market looks robust considering favourable headline inflation, robust monsoon and prospects of a demand revival, said G Chokkalingam, founder and head of research at Equinomics Research. Domestic annual retail inflation slowed to a more than six-year low of 2.10% in June, near the lower range of the Reserve Bank of India’s tolerance band, as food prices continued to ease, making a case for further interest rate cuts. Nomura expects 25 bps cuts in each of the RBI’s October and December policy meetings, and also expects banking system liquidity to be kept in a surplus for effective monetary policy transmission.

Equinomics’ Chokkalingam said any adverse move on the US tariff front is the only key risk factor for Indian markets at the moment.

Investor focus will now be on US inflation data, due later in the day, to assess the Federal Reserve’s future rate action.

Among individual stocks, Sun Pharmaceuticals rose 2.7%, as the launch of its anti-baldness drug Leqselvi in the US was expected to boost sales. Yes Bank gained 2.4% after Bloomberg News reported that Japan’s Sumitomo Mitsui Financial Group is eyeing $1.1 billion investment in the private lender to buy an additional 5% stake.

Bucking the broader trend, HCLTech dropped 3.3% and was the biggest loser among Nifty 50 and IT companies after India’s No. 3 IT exporter reported lower-than-expected quarterly profit and lowered its annual margin forecast.