Indian stock markets witnessed a sharp decline on Wednesday as retail inflation hit a 14-month high of 6.21% in October, surpassing the Reserve Bank of India's tolerance level, primarily due to soaring food prices. Today, markets are expected to start cautiously, influenced by mixed signals from Asian peers. Investor sentiment may remain cautious as data from exchanges indicated that Foreign Institutional Investors (FIIs) sold equities worth Rs 2,502.58 crore on Wednesday.

On a policy front, Chief Economic Advisor V. Anantha Nageswaran highlighted the importance of strengthening India's economic appeal through internal reforms and supporting small and medium enterprises (SMEs). He emphasized India’s need to remain resilient to global changes, particularly those in the U.S., by focusing on deregulation and sustainable growth strategies. Meanwhile, there’s some optimism with S&P Global Ratings’ view that India’s expanding supply capacity could help ease inflationary pressures, a situation seen as manageable by the Reserve Bank of India.

Additionally, tax data highlights a reduction in the tax burden on middle-income individuals (earning below Rs 20 lakh annually), while high-income earners (above Rs 50 lakh) have seen a considerable increase in tax contributions over the last decade. The mineral sector could see some positive movement following a memorandum of understanding between the Ministry of Mines and the International Energy Agency (IEA) for cooperation on critical minerals, ensuring India access to key data and strategic insights.

Elsewhere, Asian markets opened mixed as U.S. CPI data for October aligned with expectations, fostering speculation about a potential rate cut by the Federal Reserve in December. U.S. markets closed mainly positive on Wednesday, supported by these inflation readings.

In India, the equity benchmarks extended their losses on Wednesday, with FIIs selling off Rs 3,024.31 crore worth of shares. Inflationary concerns, weak quarterly earnings, and broad-based selling, particularly in stocks like Tata Steel and Mahindra & Mahindra, weighed on the markets. Traders largely ignored positive reports on India’s merchandise export growth and robust performance by public sector banks in H1FY25.

At closing, the BSE Sensex declined by 984.23 points, settling at 77,690.95, while the CNX Nifty dropped by 324.40 points, ending at 23,559.05.