Benchmark indices closed at new lifetime highs on Thursday after moderation in retail inflation raised hopes of an interest rate reduction from the Reserve Bank of India (RBI) even as the US Federal Reserve indicated at one cut in this calendar year.

The 30-share BSE Sensex closed at 76810.90, marking a gain of 204.33 points or 0.27 per cent. This came after the gauge rallied 538.89 points to touch a record intra-day peak of 77145.46.

On the NSE, the Nifty jumped 75.95 points or 0.33 per cent to end at 23398.90. During the session, it rose 158.1 points to an historic intra-day high of 23481.05.

The rally came as CPI inflation for May declined to a one-year low of 4.75 per cent. It led to optimism the RBI’s monetary policy committee (MPC) would start cutting rates in the second half of the calendar year. Economists feel any reduction in borrowing costs by the Indian central bank will be a shallow one. The positive sentiment was also supported by inflation in the US remaining stable at 3.3 per cent.

At the end of its two-day meeting, the Fed retained interest rates but said there was modest progress on its target of 2 per cent inflation.

The Fed also indicated one rate cut in 2024 which is lower than three cuts given earlier.

This, however, did not impact the buying momentum on Thursday.

“Lower inflation data in both India and US helped market touch yet another new high. Further though the US Fed kept the interest rates unchanged and the tone was hawkish, but it did hint at one rate cut towards the end of the year,’’ Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services, said.

“The market is hopefully waiting for a favourable Union budget which is likely to be announced next month. It has been consolidating over the last few days with positive bias and is slowly and gradually inching up. The uptrend is likely to continue supported by robust domestic macros, healthy monsoon prediction and strong earnings expectation,’’ Khemka said.

In the Sensex pack, Mahindra & Mahindra, Titan, Larsen & Toubro, IndusInd Bank, Tech Mahindra, UltraTech Cement, Wipro, Tata Consultancy Services, Bajaj Finance and Nestle were the biggest gainers as they rose up to 2.73 per cent.

Cautious Fed

US investors considered the Fed’s stand on inflation as one of caution as they bet on two rate cuts this year that triggered a stock and bond buying spree.

The Fed’s projection of one rate cut makes it more hawkish than other central banks, especially those in Europe, that are expected to trim borrowing costs several times this year.

US inflation date showed consumer prices in May rose by their lowest level in three years.

Given that, the Fed’s forecast for a single cut “seems like an overly gloomy view on inflation progress,” Charlie Ripley, an investment strategist at Allianz Investment Management, wrote in a client note.

With inputs from New York Times News Service