After opening the day marginally higher, share markets in India have continued the momentum and are trading above the dotted line. Sectoral indices are trading on a mixed note with stocks in the power sector and stocks in the realty sector trading in the green, while stocks in the IT sector are leading the losses.

The BSE Sensex is trading up by 120 points (up 0.4%), and the NSE Nifty is trading up by 24 points (up 0.3%). Meanwhile, the BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.9% The rupee is trading at 64.41to the US$.

In news about the economy. According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Consumer Price Index (CPI) sunk to 2.18% in May, its lowest since the Centre began measuring it on a nationwide basis in 2012

CPI was even slower than the 2.99% seen in April, the previous record low.

The fall to record lows may put pressure on the Reserve Bank of India (RBI) to change its policy stance to accommodative from neutral at present. The RBI, which kept its key lending rate unchanged last week, has warned of a looming inflation threat over the next 6-12 months, leaving the door ajar for an interest rate hike in 2017-18.

A lower inflation rate, can indicate a slowdown in demand and weaker economic activity.

In May 2016, CPI-based retail inflation grew 5.8%.

CPI Inflation at Record Low

Among the CPI components, inflation of food and beverages dipped by 1.5% in May 2017 as compared to a rise of 7.3% in the same month last year, mainly contributing to the rise in CPI inflation. The inflation for fuels fell to 5.5% in May from 6.1% in April. While that for housing was flat at 4.8% in March 2017.

In its monetary policy review last week, the RBI cut its average inflation forecast from 4.5% in the first half of the year and 5% in the second half to the range of 2-3.5% in the first half of the year and 3.5-45% in the second half.

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