Benchmark equity indices breached the 32,000 mark for the first time and the NSE Nifty closed at the new peak of 9,879 today after consumer price inflation hit a record low of 1.54 per cent in June.
The 30-share index zoomed 232.56 points, or 0.73 per cent, to hit a new peak of 32,037.38 surpassing the previous intraday record of 31,885.11. It’s a positive lead from Asia after Janet Yellen, US Federal Reserve Chief signalled that the gradual rise in rates is a key to avoid a boom and bust, and in turn will prompt investors here to buy more.
According to Consumer Price Inflation (CPI) Index for rural and urban consumers, June’s inflation figures is the lowest since India started releasing retail inflation data in January 2012.
Retail food prices for June hit a historically low 1.54%, compared with a 1.05% fall in May. Industrial output growth also plummeted to 1.7 %, raising chances of the rate cut by the Reserve Bank at its policy meet next month.
A Reuters poll of more than 30 economists had expected prices to cool to 1.70%. Analysts believe this will put pressure on the Reserve Bank of India to cut interest rates, reported The Times of India.
“The last time we saw such inflation, according to a slightly different CPI series (IW), was in 1999 and before that in August 1978,” said Arvind Subramaniam, chief economic advisor in a statement.
“This low, heartening number is consistent with our analysis for some time now, and which will be fully elaborated in the forthcoming survey of a paradigm shift in the inflationary process to low levels of inflation, a shift that I think has been missed by all reflected in the large, one-sided, and systematic inflation forecast errors that have been made,” Subramaniam added.
Looking at the inflation records, the Monetary Policy Committee may be forced to introduce a rate cut at their policy meeting in August as the RBI had maintained its benchmark interest rate.