Indian Stock Markets Tumble Amid Inflation Concerns

India's stock markets closed in the red on Thursday, with Sensex and Nifty both declining due to persistent inflation concerns. As retail inflation surpasses the central bank's tolerance level, investors remain cautious, eyeing upcoming CPI data and fluctuations in vegetable prices affecting future inflation trends.

India's stock markets extended their downward trajectory on Thursday, with key indices continuing to be in the red by the end of trading. The Sensex settled at 81,263.84 points, marking a fall of 262.30 points or 0.32 per cent, while the Nifty slipped to 24,538.85 points, down by 102.95 points or 0.42 per cent.

The markets opened on a flat note as consolidation dominated proceedings. According to Vinod Nair, Head of Research at Geojit Financial Services, the market's range-bound state is persisting with the anticipation of domestic CPI data and a weakening rupee fueling skepticism. Despite expectations for inflation to decline, a sharp focus remains on volatile vegetable prices, a crucial factor in future rate movements.

India's retail inflation figure for October surged to 6.21 per cent, crossing the Reserve Bank of India's threshold of 6 per cent. Although August's retail inflation of 3.65 per cent was among the lowest in recent years, the ascent in inflation levels since poses a consistent challenge for policymakers aiming to sustainably anchor inflation at 4 per cent.

In contrast, the Nifty IT index hit a new high, buoyed by U.S. inflation data meeting forecasts, which raises the possibility of a Fed rate cut next week, noted Nair. The upcoming weeks will focus on inflation data and policymakers' insights as investors keep a vigilant eye on these developments.

Although the latest market rebound has recouped some prior losses, indices remain several thousand points shy of their peak highs, with the Sensex nearly 4,500 points below its previous record of 85,978 points. The recent bearish sentiment is attributed to capital exits, underwhelming Q2 earnings reports by Indian corporations, and the enduring problem of high inflation.

(With inputs from agencies.)