Sensex, Nifty50 open lower after inflation spike and weak global cues

• Sensex opened 225 points lower at 57,400 while Nifty50 was down 64 points at 17,059.
• India's headline inflation in September surged to a 5-month high to 7.4% on year.
• Food inflation surged to a 22-month high of 8.6% on year in September while core inflation rose to 4-month high of 6.3%.
• As inflation remains above RBI’s tolerance level of 6%, analysts expect at least 35 basis points hike in repo rate by the Indian central bank in December.

Indian markets opened lower today after inflation numbers raised the spectre of more aggressive monetary policy action by the Indian central bank.

The Sensex opened 225 points lower at 57,400 while Nifty50 was down 64 points at 17,059.

India's headline inflation in September surged to a 5-month high to 7.4% year-on-year as compared to estimates of 7.3% — due to rise in food inflation. Food inflation surged to a 22-month high of 8.6% year-on-year in September while core inflation rose to a 4-month high of 6.3%.

“Food items continue to see an upside in price momentum especially in cereals and vegetables. Lower acreage and unseasonal rains will continue to impart upside to food prices,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.

As inflation remains above RBI’s tolerance level of 6%, analysts expect at least 35 basis points hike in repo rate by the Indian central bank in December.

“We believe that the September inflation print should keep the RBI on course for a 35 bps hike in December. External sector concerns as well as uncertainty on energy prices will keep the RBI’s policy contingent on incremental data and events,” said Rakshit.

“Overall, the combination of slightly higher inflation and fall in IIP raises concerns. However, next month data and US Fed's policy will decide whether we see a 35 or 50bp hike by the RBI in Dec'22. In any case, we continue to expect that the terminal rate will be 6.5% and there will be a pause in global monetary policy in CY23,” said Nikhil Gupta, chief economist at Motilal Oswal Financial Services group.

The fall in the benchmark indices were limited as auto, pharma and metals indices were trading in a positive range.

HCL Tech was the top gainer in Nifty50 after its September quarter earnings came in strong with the company raising revenue guidance for FY23. It reported a 6.2% increase in the second quarter net profit to ₹3,489 crore, sequentially. Its revenues too grew 3.8% sequentially to ₹24,686 crore.

At the same time, Wipro was the top loser on the 50-stock index as its quarterly profit came in below analyst expectations.

Today all eyes will be on IT major Infosys’ Q2 FY23 results, which can offer a clearer picture of the IT industry and its outlook amid global recessionary fears. Mindtree, Angel One, Anand Rathi, Cyient, Aditya Birla Money and Den Networks among companies to release their quarterly earnings today.

SEE ALSO: HCL Tech’s net profit rises 6.3% sequentially, increases FY23 revenue guidance
Wipro Q2 net profit rises 3.7% to ₹2,659 cr sequentially, but isn’t as optimistic about Q3