The bellwether stock indices surged on Thursday – riding a wave of optimism that swept through Asian markets after US consumer inflation cooled more than expected to 3 per cent in June. Speculation the US Fed may be nearing the end of its interest rate hiking campaign fuelled a rally in US stocks on Wednesday

The Sensex breached the historic 66000-mark for the first time following a rally in global markets amid moderating US inflation data.

Global markets will, however, be eyeing the Fed’s move on interest rates after the better-than-expected inflation rate in the US.

Wall Street rose on Thursday after producer prices data provided further evidence of inflation cooling in the world’s largest economy, and stoked hopes that the Federal Reserve will soon end its monetary policy tightening.

On Wednesday, the Nasdaq and the S&P 500 closed at over a year’s high, with megacap stocks leading gains after the CPI report showed consumer prices registered their smallest annual increase in more than two years.

The 30-share BSE Sensex jumped 670.31 points or 1.02 per cent to hit its all-time intra-day peak of 66064.21. The barometer settled 164.99 points or 0.25 per cent higher at 65558.89.

The NSE Nifty went up by 29.45 points or 0.15 per cent to close at 19413.75. During the day, it rallied 182.7 points or 0.94 per cent to reach its lifetime high of 19567.

HDFC Bank

Thursday also marked the first day that the merged HDFC stock traded on the bourse as HDFC Bank.

Shares of HDFC Bank climbed 0.51 per cent to settle at Rs 1,641.30 apiece on the BSE. During the day, it advanced 1.45 per cent to Rs 1,656.80.

On the NSE, the stock ended at Rs 1,641.10 per piece, up 0.49 per cent.

Rice export move

India is considering a ban on the export of most varieties of rice, a day after government data showed a surge in food inflation.

The world’s biggest rice exporter, is discussing a plan to ban all non-Basmati varieties, Bloomberg News said.

Such a move could already send lofty global prices of the food staple higher with the return of the disruptive El Niño weather pattern.

The government is discussing a plan to ban the exports of all non-Basmati rice as they want to avoid the risk of high inflation before the elections. The country produces more than 50 varies of rice.

The ban will affect about 80 per cent of India’s rice exports and while the move may lower domestic prices, it risks sending global prices even higher.

Rice is a staple for about half of the world’s population, with Asia consuming about 90 per cent of global supply. Benchmark prices have already soared to a two-year high amid fears that the return of the El Niño will damage crops.

Tanvee Gupta Jain of UBS Securities said: “We expect sustained upside risk to food inflation over the coming months partly on seasonality in vegetable prices (especially tomatoes and onions) and the likelihood of the supply/demand imbalance persisting in the case of wheat, pulses and milk.”

Inflation trend

Economists are raising their inflation forecast for the fiscal after the headline number rose to a three month high of 4.81 per cent in June largely on account of higher food and vegetable prices.

With weather-related disruptions expected to persist that could create upward risk to inflation. Experts are of the view that the Reserve Bank of India (RBI) will continue to be on an extended pause.

The fear is that if inflation remains elevated, any rate cuts will take longer. Ahead of the June inflation data, it was expected that the central bank may start cutting rates in February 2024.

“The sharp sequential uptick in food-led Inflation could spill over till August, implying pressure on the headline print will stay. There isn’t much the RBI can do in food supply management but this adds pressure on them to stay vigilant on domestic dynamics,’’ Madhavi Arora, lead economist, Emkay Global Financial Services, said.

Even as the brokerage sees CPI inflation at 5.2 per cent in the fiscal year ending March 31, 2024, Barclays Bank Plc had projected it to average 5 per cent up from 4.7 per cent earlier.

“While we remain cautious on the monsoon outturn, the sharp increase in vegetable prices is likely to remain temporary amid supply-side central government intervention,” economists at Kotak Institutional Equities said in a note.

“With waning favourable base effects, inflation has bottomed out in first quarter of 2023-24 (averaging 4.6 per cent) and will likely average 5.3 per cent in second quarter to fourth quarter of 2023-24.

“We, therefore, revise our 2023-24 inflation estimate to 5.1 per cent from 4.9 per cent.”