Reversing a six month declining trend, WPI inflation moved up marginally to 0.11 per cent in December mainly because of increase in prices of food items.
The Reserve Bank had kept policy rate unchanged in its review on April 7.
WPI inflation fell to a 5-year low of 3.74 per cent while the retail inflation was at 7.8 per cent in August.
The Reserve Bank of India unexpectedly raised its policy interest rate on Tuesday by 25 basis points (bps) but said that if consumer price inflation eases as projected, it does not foresee further near-term tightening.
A rate cut could stimulate demand and help revive industrial activity, without much risk of sparking off inflation again.
The RBI had lowered policy rates by 0.50 per cent between January-March to prop up economic growth.
RBI Governor Raghuram Rajan on Friday said keeping inflation low is the key task for sustainable economic growth of the country.
But it is likely that campaign spending resulted in some positive activity through this period.
The rise in May Wholesale Price Index based inflation has been mainly on account of 31.44 per cent increase in prices of potato, 19.40 per cent in fruits and 12.75 per cent in rice.
The experience of direct cash transfer under PM-Kisan will be useful in designing a larger scheme of DBT for farmers combining all subsidies and support for the agriculture sector in the future, say Ramesh Chand & SK Srivastava.
The Central government is stuck between the devil and the deep blue sea as far as the runaway fuel prices are concerned.
The government is somehow convinced that selective low-rate lending will stimulate demand and accelerate economic growth that plunged to a four-year low of 4.4 per cent in the first three months of 2013-14.
In the current fiscal so far, retail inflation stabilised around 5 per cent, while wholesale price-based inflation averaged around 2.9 per cent during April-December.
But the 30-share Sensex rose by 141.52 points, or 0.41 per cent, to close at 34,297.47. The broader NSE Nifty gained 44.60- points, or 0.42 per cent, to end at 10,545.50 after touching a high of 10,618.10.
The Nikkei India Manufacturing PMI dipped from 50.3 in November to 49.1 in December.
Progress of monsoon, investment trend by foreign investors and the movement of rupee against the dollar will also influence sentiment
Fourth quarter earnings of blue-chips such as Infosys, TCS, Wipro, RIL and inflation data for March will dictate the trend on the bourses in a holiday-shortened week ahead, experts said.
Slight recovery in growth is expected only in July-September.
A strong set of industrial output numbers for January provided the perfect backdrop to reap more dividends, with the IIP having expanded 2.7 per cent year-on-year.
The central bank has lowered its policy rate twice so far in 2015.
The longest winning streak was the six years between 2002-2007 when the Nifty moved from around 1,000 to over 6,000.
The RBI gauges both measures of inflation when deciding on monetary policy,
On the gaining side, Hero Moto, SBI, HDFC, HUL and L&T have gained between 1-1.4 per cent.
Industrial production was seen growing 1.8 per cent from a year earlier in July, slower than June's 3.4 per cent increase, according to the median consensus in a poll of 31 economists.
Home Minister Rajnath Singh said that the decision could cost the government roughly Rs 15,000 crore.
Rajan addressed a group of investors in Boston on Thursday.
The rupee recovered 14 paise to 66.40 against the dollar in early trade on Monday.
The rapid deceleration in prices has ignited a debate in New Delhi whether Asia's third-largest economy is heading towards deflation.
The Reserve Bank of India hiked key interest rates by 0.25 per cent each in the last two reviews to tame inflation.
'So far, the government has sanctioned more than Rs 300 billion as GST refunds,' Ansh Bhargava and Aditya Singhania point out.
Sun Pharma was the best gainer among Sensex components, surging 6.91 per cent
Financial services firm AnandRathi analysed the key points of the policy soon after it was announced.
Financial services firm AnandRathi analysed the key points of the policy soon after it was announced.
In the broader market, the S&P BSE Midcap added over 1% to finish at record closing high
The stronger than expected monsoon has not yet softened food inflation as much as it should have and in particular, vegetable prices have been impacted by weather-driven supply disruptions, said RBI Governor D Subbarao while unveiling the first quarter monetary policy review.
The Reserve Bank of India is widely expected to lower interest rates for a third time this year.
