Sensex ends 206 points up on easing inflation

Indian equity benchmarks gained strength in the second half of trade on Thursday - after witnessing consolidation since Tuesday - to close at three-week highs, especially triggered by easing food inflation in the month of February. Financial, capital goods, auto, select metal and technology companies' shares lent strong support to the markets. Heavyweight Reliance Industries too rallied.

India's food inflation eased to a two-month low in early February on moderating prices of onions and other vegetables, amid expectations that the government may announce fresh measures to boost productivity for key staples in the upcoming budget.

India's food price index rose 11.05%, the lowest reading since the first week of December, and the fuel price index climbed 11.92% in the year to February 5, government data on Thursday showed. Primary articles index increased 14.59% as against 16.24% on week-on-week basis.

Aditi Nayar, Economist of ICRA said the decline in food inflation was led by continued correction in vegetable prices. However, this was offset to an extent by an increase in the price of pulses, non-vegetarian protein items, fruits and condiments.

"While wholesale prices of vegetables may ease further in the coming weeks, prices of other food items are likely to remain sticky and average food inflation may remain in the low double-digits in February 2011," she said.

Finance Minister Pranab Mukherjee sees overall inflation going down over the next 1-2 months.