Volatility in Indian stock markets continues to remain as they again declined on Thursday morning. Today’s decline was largely due to elevated inflation levels in the country.

At 9.42 am, Sensex traded at 57,372.97 points, down 252.94 points or 0.44 per cent, whereas Nifty traded at 17,057.90 points, down 65.70 points or 0.38 per cent.

India’s retail inflation surged to 7.41 per cent in September, remaining above the Reserve Bank of India’s mandated range of 2-6 per cent for the third straight quarter – nine straight months. In August, the retail inflation was 7 per cent.

Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.

Meanwhile, Rupee seemed to have stabilised on expectations of possible intervention by the RBI through liquidity management to defend the depreciating rupee. Typically, the RBI intervenes in the market through liquidity management, including through the selling of dollars.

At 9.46 am, Rupee appreciated marginally from the previous day’s close to trade at 82.288 per US dollar.

For fresh cues, investors await the US September inflation data, due later today.
“An important data with the potential to move markets globally is the US inflation numbers. This data coming today is broadly expected to be flattish with a slight upward bias.

But if the actual data indicates a mild softening of inflation, markets are likely to stage a relief rally on expectations that the Fed will not sound aggressively hawkish.

There are concerns that the Fed might overdo tightening leading to a hard landing of the US economy. Therefore, this US inflation data has to be closely watched,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Consumer inflation in the US though declined marginally in August to 8.3 per cent from 8.5 per cent in July but was way above the 2 per cent goal.

“As investors anticipate inflation figures from the U.S., which are coming later tonight, Asian markets are primarily trading in the red on Thursday. As they release their second-quarter profits for FY23, IT stocks will continue to steal the show. Later in the day, Infosys and Mindtree are most likely to present their Q2FY23 performance,” said Mohit Nigam, Head – PMS, Hem Securities.