Experts said that retail inflation is expected to remain above the RBI's upper tolerance limit of 6 per cent over the next few months, and this could increase the likelihood of monetary tightening
Nifty Bank, Auto, Realty skid 1% as inflation stokes RBI rate hike fears
Abhinav Ranjan New Delhi
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Rate-sensitive sectors, including banking, auto and realty, came under pressure in trade on Friday as retail inflation surged to 6.09 per cent in October, breaching the upper limit of the tolerance band set for the RBI for the first time in two years. This has raised concerns over further monetary tightening by the RBI at its upcoming policy meeting.
As of 9:35 AM, the Nifty Auto index was the worst-performing sectoral gauge, declining 1.17 per cent. As many as 12 of its 15 constituents traded in the red, with Ashok Leyland, M&M and Maruti Suzuki leading the losses, falling between 1 and 2 per cent.
The Nifty Bank index slipped 0.91 per cent, with 13 of its 14 constituents trading lower. IndusInd Bank, HDFC Bank, AU Small Finance Bank, Canara Bank and Axis Bank declined more than 1 per cent each. Punjab National Bank (PNB) was the only constituent trading in positive territory.
The Nifty Financial Services and Nifty Realty indices were also under pressure, declining 1 per cent and 0.81 per cent, respectively.
Experts said that CPI-based retail inflation is expected to remain above the RBI's upper tolerance limit of 6 per cent over the next few months, and this could increase the likelihood of monetary tightening, with the central bank potentially raising the benchmark interest rate in its December and February monetary policy reviews.READ MORE: Retail inflation breaches RBI's 6% upper limit at 2-yr high of 6.09% in Oct
CPI-based retail inflation rose to 5.54 per cent in September, as a sustained uptick in food & beverages (F&B), restaurant services and transport inflation played a key role in pushing up the October headline number.
Data released by the Ministry of Statistics & Programme Implementation showed that food inflation spiked to 8.94 per cent in October from 7.74 per cent in the previous month.
This is the first time in two years that retail inflation has breached the RBI's upper tolerance band of 6 per cent. The central bank is mandated to keep inflation within the range of 2-6 per cent. In October 2024, retail inflation was 6.25 per cent.
Garima Kapoor, deputy head of research and economist at Elara Capital, said that notwithstanding the cooling of crude oil prices amid expectations of peace in West Asia, inflation is unlikely to cool off immediately as pass-through of previous hikes continues.
"We expect RBI to hike rates by another 50 bps over next 6 to 9 months," she said.
The next meeting of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is scheduled for December 2-4, with the policy decision due on December 4.
Aditi Nayar, chief economist, ICRA, said that further 25 bps rate hike in December appear almost certain. Thereafter, the trajectory of crude oil prices, which have cooled in the recent sessions, will be critical in shaping the need for and extent of additional rate tightening in 2027.
ICRA expects CPI inflation to average at ~6.2 per cent in Q3FY2027, slightly higher than the MPC's projection for the quarter (+6 per cent), before easing modestly thereafter as the adverse base effect dissipates. However, risks remain tilted to the upside, reflecting the impact of the deficient and uneven monsoon, while crude oil prices remain a key monitorable.
Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.
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First Published: Nov 13 2026 | 10:08 AM IST
