Domestic shares rose on Monday, while the benchmark 10-year bond hit its highest in four weeks, after consumer inflation in April eased to its lowest in at least five years, reviving a debate on whether the central bank should cut interest rates.

At 2.45 p.m., the 30-share BSE index Sensex was up 146.91 points or 0.49 per cent at 30,335.06 and the 50-share NSE index Nifty was up 44.3 points or 0.47 per cent at 9,445.20.

Both indexes were not far from record highs hit last week.

Among BSE sectoral indices, metal index gained the most by 2.31 per cent, followed by healthcare 1.2 per cent, realty 1.15 per cent and banking 0.81 per cent. On the other hand, consumer durables index was down 0.7 per cent, TECk 0.7 per cent and IT 0.68 per cent.

Top five Sensex gainers were Tata Steel (+4.35), Dr Reddy's (+4.05%), Lupin (+2.78%), ICICI Bank (+1.9%) and Maruti (+1.34%), while the major losers were Infosys (-1.32%), Adani Ports (-0.77%), Hero MotoCorp (-0.62%), Axis Bank (-0.52%) and Reliance (-0.4%).

Bond yields

Meanwhile, the benchmark 10-year bond yield was down 8 basis points at 6.83 per cent, after earlier falling to 6.82 per cent, the lowest since April 17.

The yield for the new 10-year bond eased 12 basis points to 6.67 per cent from the cut-off price set on Friday, when the debt was sold for the first time.

FII inflows

Meanwhile, the rupee rose to 64.0275 per dollar, its strongest since April 27, on expectations of additional foreign portfolio inflows into Indian markets.

The rally came after data late on Friday showed consumer prices rose by an annual 2.99 per cent, compared with 3.89 per cent in March, extending a debate about whether the Reserve Bank of India is being too hawkish on inflation.

Hopes for easing inflation got a further boost after the domestic weather office said on Sunday monsoon rains had reached the country's Andaman and Nicobar islands ahead of the schedule.

The Reseve Bank of India had stunned markets in February by changing its policy stance to “neutral” from “accommodative” and issuing a statement at its last policy meeting in April that was widely seen as hawkish.

Most analysts still expect the RBI to hold rates steady this year, although the inflation data and prospects of higher-than-expected monsoon rains are fuelling calls for the central bank to cut rates. The next policy meeting is set for June 6.

“The sharp pullback in April CPI inflation raises doubts on the central bank's cautious policy outlook,” Radhika Rao, an economist for DBS Bank in Singapore, said in an email to clients.

“Eyes are next on the June RBI review. An about-turn in policy is unlikely but policy guidance will be more neutral and balanced than April.”

Inflation, IIP data

The government had on Friday launched the updated series of data for the Index of Industrial Production (IIP) and Wholesale Price Index (WPI)-based inflation, which registered healthier factory output and lower price pressures.

But measured by the old series, factory output was lower at 2.5 per cent in March and had contracted by 1.2 per cent in February. Likewise, the IIP annual growth in 2016-17 under the new series is 5 per cent against 0.7 per cent under the old series.

Despite a sharp rise in fuel prices, WPI inflation under the new series eased to 3.85 per cent in April from 5.3 per cent in March. Similarly, Consumer Price Index (CPI)-based inflation eased to 2.99 per cent in April, from 3.89 per cent in March, due to lower cost of food items.

Asian shares

Asian stocks got off to a shaky start as a ransomware attack that locked up more than 200,000 computers in over 150 countries and a missile test by North Korea on Sunday kept investors on edge.

MSCI's broadest index of Asia-Pacific shares outside Japan was little changed. Japan's Nikkei retreated 0.3 per cent on a stronger yen. Australian shares fell 0.2 per cent, while South Korea's KOSPI was little changed.