Indian stock markets experienced significant intraday volatility on Tuesday as traders positioned themselves ahead of the Consumer Price Index (CPI) report. According to reports from Investing.com India, the Nifty and Sensex rose about 1% at the start of the day, then fell nearly 3.25%, before rebounding by roughly 2%. The VIX 1-Day volatility index reached around 20, which is elevated and could set up a volatility crush following the morning CPI report. However, the volatility release seen on Monday was fairly tepid after the initial morning bounce, suggesting similar patterns may emerge after today's report. As per TradingView News, attention has now shifted squarely to the May Consumer Price Index report due on June 12, with the inflation report taking on outsized significance following recent market developments.
The CPI report is expected to show strong headline inflation and more modest core CPI readings. As reported by Investing.com India, market-based pricing suggests that headline CPI will come in at around 4.25%, which effectively rounds up to 4.3%. According to TradingView News, economists expect headline CPI to rise 0.5% month-on-month in May, while core CPI, which excludes food and energy prices, is forecast to increase 0.3%. However, experts now see inflation can edge higher and may breach RBI's medium-term target of 4%. As per Brickwork Ratings, CPI inflation in May 2026 is expected to firm slightly to around 4.0%, reflecting higher crude oil prices, fuel pass-through, and import-cost pressures stemming from geopolitical tensions. The recent uptick in petrol and diesel prices by Oil Marketing Companies (OMCs) may push up transport costs, while the recent spike on commercial LPG cylinders may impact food inflation.
Food inflation is expected to surge in May, with experts forecasting it to hover near 4.5%. According to Brickwork Ratings, early heat stress and uneven pre-monsoon showers keep vegetables and perishables unstable, while cereals and edible oils face renewed pressure from higher freight and fertiliser costs. Patchy pre-monsoon and concerns of below-normal monsoon can also impact food inflation in the coming months. The West Asia crisis-led fertiliser supply crunch also pose a threat to India's agrarian economy. In April, food inflation, measured by the Consumer Food Price Index (CFPI), increased to 4.20% from 3.87% in March, with rural food inflation at 4.26% and urban food inflation at 4.10%. As per CRISIL, food inflation faces upside risk from below-normal monsoon this fiscal.
Core inflation is expected to remain contained at around 3.7%, though it may firm marginally if rising energy costs begin to filter into services and non-food categories. According to Brickwork Ratings, overall, May's print is likely to show a cautious re-acceleration rather than a sharp inflation spike. The recent uptick in petrol and diesel prices by the Oil Marketing Companies (OMCs) may push up transport costs, while the recent spike on commercial LPG cylinders may impact food inflation. However, rising energy cost can impact non-food categories and push core inflation as well, though the overall trend remains contained.
Market investors would keenly track inflation data, the US Fed interest rate decision, and trends in crude oil prices to determine further movement, according to analysts. As reported by The Hindu BusinessLine, the US Federal Reserve's policy decision will be the most significant event globally. Foreign investors remained sellers in Indian equities, dumping more than ₹62,853 crore of shares in the first fortnight of June. With the latest outflows, total withdrawals by Foreign Portfolio Investors (FPIs) from Indian equities have surged to ₹2.87 lakh crore so far in 2026, surpassing the ₹1.66 lakh crore pulled out during the entire calendar year 2025, according to data from the National Securities Depository Ltd (NSDL). Recent geopolitical developments, which everyone expects to lead to a peace deal between the US and Iran, have led to a sharp correction in the price of Brent crude, which is positive for big oil importers like India, as noted by Geojit Investments Limited.
