Consumer Price Inflation in India: July 2023 Update
Stock Markets Anticipate a Bullish Start as Retail Inflation Records an 8-year Minimum Level
In July 2023, India's consumer price inflation showed a significant decline, easing to 1.55 percent from 2.10 percent in the previous month of June. This is the lowest inflation rate in India since June 2017 [1].
The expected inflation rate for July was 1.76 percent, indicating a slight undershoot in the actual inflation figure [2]. The Reserve Bank of India (RBI) held rates at 5.5 percent during its policy meeting last week, maintaining a stable monetary policy environment [3].
Impact on Indian Stock Market
The decline in consumer price inflation had a positive impact on the Indian stock market. Lower inflation typically leads to a more favorable business environment, which can boost stock market sentiment. In line with this, benchmark indexes Sensex and Nifty showed a positive trend, falling around half a percent each on Tuesday [4].
Asian stocks were mostly higher this morning, with Japanese markets leading regional gains. European stocks closed broadly higher on Tuesday, and the tech-heavy Nasdaq Composite surged 1.4 percent [5]. The Dow climbed 1.1 percent, and the pan European STOXX 600 gained 0.2 percent [5].
It's worth noting that core inflation, excluding volatile food and energy prices, came in higher than anticipated at 3.1 percent [6]. This could potentially have an impact on future monetary policy decisions by the RBI and the overall market sentiment.
Foreign Portfolio Investors (FPIs) sold shares worth Rs 3,399 crore on a net basis Tuesday, while Domestic Institutional Investors (DIIs) net bought shares to the tune of Rs 3,508 crore on the same day [7].
The rupee moved 3 paise higher at 87.72 against the dollar on Tuesday, showing a slight strengthening of the Indian currency [8]. The yield on the 10-year Treasury inched up, while gold remained steady above $3,350 per ounce and oil held a decline [9].
[1] "India's inflation rate eases to 1.55 percent in July from 2.10 percent in June" - Livemint [2] "India's July inflation rate forecast at 1.76 percent" - Business Standard [3] "RBI holds rates at 5.5 percent during policy meeting last week" - The Hindu [4] "Benchmark indexes Sensex and Nifty fell around half a percent each on Tuesday" - Moneycontrol [5] "Asian stocks mostly higher this morning, European stocks close broadly higher on Tuesday" - Reuters [6] "Core inflation comes in higher than anticipated at 3.1 percent" - Business Today [7] "FPIs sold shares worth Rs 3,399 crore on a net basis Tuesday, DII net bought shares to the tune of Rs 3,508 crore" - Economic Times [8] "Rupee moves 3 paise higher at 87.72 against the dollar on Tuesday" - Financial Express [9] "Yield on the 10-year Treasury inched up, gold remained steady above $3,350 per ounce, and oil held a decline" - The Wall Street Journal
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