Nifty Likely To Open On Flat Note After Inflation Data

Indian stock markets are likely to start Wednesday's session on a flat note, with the SGX Nifty trading 12 points lower at 10,244.50 on Singapore Exchange. Government data on Tuesday showed retail inflation (based on Consumer Price Index or CPI) increased sharply to a 15-month high of 4.88 per cent in November, from 3.58 per cent in October. Shares in the other Asian markets were flat. MSCI's broadest index of Asia-Pacific shares outside Japan was a few ticks higher in early trade. Japan's Nikkei stock index edged down slightly. Overnight on Wall Street, the Dow Jones industrial average and the S&P 500 both notched record closing highs, though the Nasdaq Composite shed 0.19 per cent.

Snapping three straight sessions of gains, the National Stock Exchange (NSE) benchmark index Nifty closed 0.8 per cent lower at 10,240.15 on Tuesday. The BSE Sensex ended down 0.68 per cent at 33,227.99. Both the indices had gained over 2.6 per cent each in the previous three sessions.

Separately released data showed industrial output growth (Index of Industrial Production) eased to 2.2 per cent in October from an upwardly revised 4.1 per cent year-on-year increase in September.

"The combination of higher inflation and flat growth almost rules out any rate cut by the RBI in the next couple of monetary policies," said Jaikishan J Parmar, research analyst at Angel Broking.

Retail or consumer inflation was driven mainly by faster rises in prices of food and fuel products. The November figure was higher than the RBI's medium-term target of 4 per cent, shrinking room for the central bank to cut rates in near future. Vegetable prices showed a spike, with prices rising 22.48 per cent year-on-year in November. Higher fuel prices (up nearly 8 per cent) also pulled inflation higher.

"The RBI had already warned about the sharp increase in inflation in its monetary policy in the aftermath of the higher HRA payable to government employees. The real surge in inflation came in rural inflation which sharply moved up from 3.36 per cent to 4.79 per cent. This is likely to force the MPC to put off rate cuts for the time being," Mr Parmar of Angel Broking said.