Sensex below 33,000 as inflation data dashes rate cut hopes

Indian markets fell for a consecutive day after accelerating inflation tempered expectations of a rate cut by the Reserve Bank of India (RBI). The 30-share BSE Sensex fell 91.7 points, or 0.3 per cent, to close at 32,942. It closed below 33,000 for the first time since October 24. The National Stock Exchange’s Nifty 50 lost 38 points, or 0.4 per cent, to end at 10,186.6.

India’s retail inflation grew 3.58 per cent last month, government data showed on Monday, driven by a faster rise in prices of food and fuel products. Experts said the inflation figure could accelerate further, amid rebounding oil prices. “The likelihood of inflation testing the four per cent target by late 2017 and staying above it for the rest of 2018 reinforce our expectations that central bank will remain on hold in December and the rest of 2018,” said Radhika Rao, economist at DBS Group Research, in a note.

The yield on the benchmark 10-year government security rose to as much as 7.07 per cent, the highest since September 15, 2016, and up 10 basis points so far from its previous close of 6.97 per cent on Monday.

Experts said the spike in yields was an indication that the market sees little chances of the RBI cutting interest rates at its next policy meeting. The central bank meets next month to rule on rates. “Markets appear to be consolidating right now. Don’t see any major downside or upsides as of now. So, I think, at the end of the quarter, markets will move in narrow ranges,” said R K Gupta, MD, Taurus Asset Management.