July 16, 2025: After four straight sessions of losses, Indian equity markets bounced back on Tuesday, buoyed by positive economic data that signaled easing inflation. Investor sentiment was lifted after the Ministry of Statistics and Programme Implementation (MoSPI) reported that retail inflation cooled to a 77-month low of 2.1% in June, down from 2.8% in May.
The benchmark indices reflected this optimism. The BSE Sensex gained over 450 points, while the NSE Nifty 50 rose by more than 130 points during the day’s trade. Broader markets also participated in the rally, with mid-cap and small-cap stocks showing notable gains.
Key Drivers of the Market Rally:
- Inflation Eases: The sharp drop in retail inflation, particularly in food and energy categories, revived hopes of continued economic stability. The Consumer Price Index (CPI)-based inflation is now at its lowest level since November 2017.
- Interest Rate Hopes: With inflation well below the Reserve Bank of India’s (RBI) upper tolerance limit of 6%, market analysts believe the central bank might have more room to maintain or even cut interest rates in the near term.
- Sector Performance: Banking, FMCG, and real estate stocks led the charge, driven by expectations of stronger consumer demand and lower borrowing costs. Auto stocks also advanced on hopes of increased rural spending.
Expert View:
Anuj Mehta, an equity strategist at Axis Securities, said, “Markets were looking for a trigger to break the losing streak, and the inflation numbers provided just that. If inflation remains subdued, we could see a sustained rally in the coming sessions.”
What to Watch:
Investors are now awaiting corporate earnings reports and commentary from the upcoming RBI policy meeting to gauge future market direction. Global cues, particularly from US inflation and interest rate data due later this week, will also play a crucial role.