Sensex Slumps 610 Points and Nifty Falls 221 Points as Retail Inflation Breaches RBI 6% Ceiling
Indian equity markets witnessed broad-based selling pressure on Friday morning as benchmark indices tumbled following the release of official macroeconomic data showing retail inflation breached the Reserve Bank of India's (RBI) upper tolerance threshold for the first time in two years.
The BSE Sensex dropped by as much as 610 points in the opening half-hour of trading, while the NSE Nifty 50 slipped 221 points, dragging all 16 major sectoral indices into the red.
CPI Breaches Upper Tolerance Band
According to data released by the Ministry of Statistics and Programme Implementation (MoSPI), India's Consumer Price Index (CPI)-based retail inflation quickened to 6.09% in October, up sharply from 5.54% recorded in September. The reading breached the RBI's mandated medium-term inflation target band of 4% (+/- 2 percentage points), crossing the critical 6% ceiling for the first time since October 2024.
The spike was primarily fueled by food inflation, which surged to 8.94% in October compared to 7.74% in September, driven by steep increases in vegetable prices and agricultural supply disruptions. Broader price pressures also intensified across categories, with restaurant, personal care, and miscellaneous services posting elevated inflation figures.
Rate Hike Expectations Intensify
The faster-than-anticipated acceleration in inflation has unsettled Dalal Street, where market participants had been weighing the central bank's rate trajectory. In its previous policy review, the RBI had raised the benchmark repo rate by 25 basis points to 5.50% and adopted a calibrated tightening stance.
With price pressures broadening across the consumption basket and crude oil prices remaining elevated, economists and brokerage firms are increasingly pricing in an additional 25-basis-point repo rate increase at the upcoming Monetary Policy Committee (MPC) meeting, with another possible hike in February.
Market Laggards and Sectoral Impact
Selling was widespread across rate-sensitive counters, consumer discretionary, and heavyweights.
Major stocks pulling the benchmark indices lower included:
- Shriram Finance: Emerged as one of the steepest fallers on the Nifty in early deals.
- Mahindra & Mahindra: Dragged the auto pack lower amid concerns over higher financing costs.
- HDFC Bank: Heavyweight private lender witnessed sustained selling pressure.
- Trent and InterGlobe Aviation (IndiGo): Led losses among discretionary and consumer services names.
- Bharat Electronics Limited (BEL): Traded lower as public sector and capital goods stocks faced profit-taking.
Despite foreign institutional investors (FIIs) participating as net buyers in the preceding session, the twin headwinds of elevated crude oil prices and a deteriorating inflation trajectory proved too heavy for domestic equities to withstand, leaving investors cautious ahead of the RBI's policy review.
