Falling inflation, at last, is fuelling hopes that interest rates may be cut sooner than H2 2015 as earlier forecast by many economists. This optimism is also contributing, along with firmer global stock markets, to push India's SENSEX and NIFTY to new all-time highs. India's inflation dropped to a new multi-year low last month. Data released this week showed that the wholesale price index rose an annual 1.77% in October, its slowest since September 2009. The consumer price inflation, which is used to set policy interest rates, dropped to 5.52%, below the 6% target set by the Central Bank for January 2016. There is increasing pressure now on the RBI to reduce interest rates sooner than later. However, it has resisted cutting rates on worries of price pressures resuming once a favourable base effect fades out. And that food prices may spike up again after recent poor monsoons.

David Fuller's view

Here is the India Report.

The drop in Brent crude oil is helping to lower India’s inflation rate.  However, domestic food prices too often have the capacity to lift the country’s inflation.  This is one of the many Herculean challenges that Narendra Modi faces.  Meanwhile, the India Mumbai Sensex Index remains in form, albeit temporarily a little overextended.