How Did the Indian Stock Market React to Lower Inflation Data?
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Synopsis
The Indian stock market rallied on August 13 following the news of a significant drop in the consumer price index (CPI) to an eight-year low, leading to a surge in midcap stocks. This development sparked optimism among investors, reflecting a potential revival in discretionary spending, particularly in the auto and metal sectors.
Key Takeaways
- Sensex closed at 80,539.91, up 304 points.
- Nifty ended at 24,619.35, gaining 131.95 points.
- CPI fell to 1.55 percent, the lowest since June 2017.
- Strong performance in midcap stocks.
- Rupee appreciated to 87.51.
Mumbai, Aug 13 (NationPress) The Indian stock market concluded on a positive note on Wednesday, propelled by a significant drop in the consumer price index (CPI) to an eight-year low, alongside robust buying interest in midcap stocks.
The inflation rate in India, as indicated by the CPI, further declined to 1.55 percent in July, reflecting a decrease in food prices. This marks the lowest year-on-year retail inflation since June 2017.
The Sensex closed at 80,539.91, gaining 304 points or 0.38 percent. The 30-share index opened strong at 80,492.17, in contrast to the previous session's close of 80,235.59, spurred by favorable inflation data. Throughout the day, the index remained stable with buying seen in specific sectors such as auto and metal.
Nifty ended at 24,619.35, up 131.95 points or 0.54 percent.
According to Vinod Nair, Head of Research at Geojit Investments Limited, "The Indian equity market enjoyed widespread optimism as CPI reached an eight-year low, raising expectations for a revival in discretionary spending, particularly in the auto and metal sectors. Midcap stocks showed strong performance, indicating a healthy investor appetite. Global sentiment also improved due to the extension of China’s tariff deadline and declining oil prices."
Despite uncertainties surrounding Trump’s trade policies and global risks, India’s growth-inflation dynamics appear favorable for FY26, with a slight risk of downgrade based on tariff updates. Attention is also focused on the upcoming Trump-Putin meeting scheduled for August 15.
Top gainers in the Sensex pack included BEL, Eternal, Mahindra and Mahindra, Kotak Bank, Power Grid, Tata Motors, Bharti Airtel, Bajaj Finance, Sun Pharma, Asian Paint, and Trent. In contrast, ITC, Ultratech Cement, and Titan finished in the red.
The majority of sectoral indices reflected the market’s positive sentiment. The Nifty Fin Services increased by 103 points or 0.39 percent, Nifty Bank rose by 137 points or 0.25 percent, and Nifty Auto surged by 266 points or 1.12 percent. Meanwhile, Nifty IT and Nifty FMCG remained flat.
Broader indices also followed the upward trend, with midcap stocks drawing significant investor interest. Nifty Next 50 climbed 398 points or 0.60 percent, Nifty 100 rose 137 points or 0.25 percent, Nifty Midcap 100 saw a rise of 356 points or 0.63 percent, and Nifty Small Cap 100 increased by 115 points or 0.66 percent.
The rupee traded strongly at 87.51, appreciating by 0.23 paise, driven by optimism over potential positive developments in the Russia-Ukraine conflict as US President Trump and Russian President Putin prepare to meet on August 15, noted Jateen Trivedi of LKP Securities.
The favorable CPI data in India and the US also contributed to the positive sentiment. The rupee is expected to trade within a range of 87.25–88.00, Trivedi added.
Point of View
I emphasize the importance of monitoring inflation trends closely. With the CPI hitting an eight-year low, it’s crucial to understand the underlying factors driving this change and its implications for both consumers and investors. Our reporting aims to provide insightful analysis and timely updates as the market reacts to these developments.
NationPress
20/08/2025
Frequently Asked Questions
What caused the recent rise in the Indian stock market?
The recent rise in the Indian stock market is primarily attributed to the significant drop in the consumer price index (CPI) to an eight-year low, which has boosted investor sentiment, especially in midcap stocks.
How low did the CPI fall in July?
In July, the CPI fell to 1.55 percent, marking the lowest level of year-on-year retail inflation since June 2017.
Which sectors performed well during this market rally?
Sectors such as autos and metals performed particularly well during the market rally, with strong buying interest contributing to the overall positive sentiment.
What is the outlook for the Indian rupee?
The rupee traded strongly at 87.51, with expectations to remain within a range of 87.25–88.00, largely influenced by international developments.
What are the implications of the Trump-Putin meeting?
The upcoming Trump-Putin meeting is being closely watched as it may lead to positive developments regarding the Russia-Ukraine conflict, which could further impact market sentiment.
