Equities gain as inflation data spur rate-cut hope

Stocks climbed for a first time in three days, led by gains in mid- and small-sized companies, after a more-than-estimated easing in the nation's main inflation rate revived calls for an interest-rate cut.

The BSE 100 Index rose 0.4 per cent, while the S&P BSE Sensex added less than 0.1 per cent after changing direction at least 12 times. The gauges fell the most in almost three months Monday, as global equities slumped amid concern that central banks are preparing to wean markets off unprecedented stimulus.

"The drop in consumer-price inflation increases the probability of a rate cut, and if the Fed doesn't raise rates at its next meeting, stocks will rebound sharply," Arjun Prajapati, vice-president at Asit C Mehta Investment Interrmediates in Mumbai, said by phone. The Sensex has retreated 2.3 per cent after reaching an 18-month high on Thursday amid a rout in financial markets that's wiped some $2 trillion off the value of global equities over the past week. Volatility soared after a report showed fund managers are hoarding more money in cash amid uncertainty over the trajectory of central bank stimulus globally.