India’s consumer price inflation (CPI) for April 2025 has dropped to a multi-year low of 3.16%, the lowest since July 2019. This sharp moderation in inflation was largely driven by easing food prices, particularly a significant contraction in vegetable inflation. The softer CPI reading has given rise to hopes of a more accommodative monetary policy from the Reserve Bank of India (RBI), with market participants speculating about a potential deeper rate cut cycle.
Market Reacts Positively to Cooling Inflation
The sharp dip in CPI triggered a strong reaction in the stock market. Nifty 50 crossed the 24,700 mark, while the Sensex surged over 500 points, reflecting improved investor confidence. The rally was largely supported by cooling inflation data, which boosted expectations of monetary easing and improved liquidity conditions.
At 9:28 am on Wednesday, May 14, the Sensex was up by 467.86 points or 0.58% at 81,616.08, while the Nifty 50 gained 152.35 points or 0.62% to trade at 24,730.70. Market breadth was clearly in favor of the bulls, with 2,157 stocks advancing, compared to 609 declining, and 115 remaining unchanged.
Sectoral Indices in Green, IT and PSU Banks Lead Gains
Almost all Nifty sectoral indices were trading in positive territory, with the exception of the Nifty Pharma index. The Nifty IT and Nifty PSU Bank indices led the charge, registering gains of up to 0.8%. The broader markets were in sync with the benchmarks, with midcap and smallcap indices also rising about half a percent in early trade.
Investor Sentiment Boosted by Rate Cut Hopes
The easing consumer inflation has fueled hopes among investors for a prolonged rate cut cycle by the RBI, which in turn could support economic growth and corporate earnings. The data indicates that price pressures are now under control, especially in the food category, allowing more room for monetary easing without risking inflationary flare-ups.
Global Cues Remain Mixed Amid Policy Shifts
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that global markets remain volatile, reacting to frequent changes in policy narratives. The US-China trade tensions have eased with a deal in place, but a spike in US 10-year bond yields to 4.47% could potentially divert foreign investment away from Indian equities.
“There is a risk of foreign capital moving back to Chinese stocks, especially now that US-China relations appear to be improving,” Vijayakumar warned.
Technical Picture: Resistance Ahead and Rising Bearish Sentiment
From a technical standpoint, Open Interest (OI) clusters between 24,700–24,900 indicate strong resistance at higher levels. The Put-Call Ratio (PCR) has dropped sharply from 1.18 to 0.69, pointing towards a rise in bearish sentiment in the options market. Moreover, Max Pain is currently positioned at 24,550, suggesting the market awaits a clear directional trigger.
Strategy for Traders and Investors
Market experts are urging caution amid the current high volatility. According to analyst Matalia, traders should adopt a disciplined trading strategy with strict risk management, particularly when engaging in short-term opportunities. Given the ongoing global uncertainties, it is advisable to avoid large overnight positions and enforce tight stop-losses to mitigate risks.
Conclusion:
With India’s CPI hitting a multi-year low of 3.16%, investor sentiment has clearly improved, leading to a broad-based rally in the stock market. However, global headwinds, technical resistance, and volatile sentiment call for a measured approach. Traders and investors should keep an eye on further cues from the RBI and global markets while maintaining strong risk controls.
