It’s the 12th of the month again, and we have in our inboxes the monthly CPI Inflation data from the MoSPI. With the combined retail inflation of 2.75% for the month of January 2026, which is in tandem with the Central Bank’s proposed limit of 2%-6%. This is the first time headline inflation returned to the target rate since August 2025.
It is interesting to note that the base year has been revised from 2011-12 to 2024. This revision has taken place after a long 10 years from 2015. The prices were previously being measured relative to the 2011-12 consumption pattern, but that has been changed for the good. The Household Consumption Expenditure Survey (HCES) has been used to study these patterns.
So, what all remains the same and what all is impacted?
The monthly price changes, the raw price collection, and the YoY inflation math do not change. Which goods and services are in the basket, how much weight each item gets, and the representativeness of the consumption pattern is what changes. The CPI now also collects prices from 12 new online marketplaces along with offline markets.
What do the new weights look like?
The government is realising the plummeting importance of food and beverages and its weight has been reduced from the earlier ~46% to ~37%. Whereas, the weight of housing, water, electricity, gas and other fuels has been increased to ~17% from ~10%. CPI is now more services-driven, and is going to experience less volatility from pure food spikes. Due to the core services sectors being factored in, the inflation signals may appear smoother, more “stickier”, and slow to fall.
Who took a backseat and who is steering?
Obsolete items like DVD/VCR/VCD, radio, tape recorder, second-hand clothing etc. have been eradicated, and new entrants like OTT, rural housing, pendrives and external hard disks have been added to the index. This is a small yet significant step by the government to acknowledge the changing consumer trends.
What to watch with your spectacles on?
The current CPI structure is a signal of a stable but selective macro backdrop rather than an all-clear, broad risk-on environment. Even though headline inflation is low, services inflation (~ 3% to 3.5%) running above the headline (2.75%) suggests the RBI is unlikely to turn aggressively dovish, so expectations of rapid rate cuts should not be assumed and rate-sensitive sectors should be approached with valuation discipline.
At the same time, low transport inflation (0.09%) supports operating margins across logistics-heavy and consumption businesses, while falling staple food prices can lift rural disposable income and selectively benefit rural-focused FMCG, entry-level auto, and agriculture-linked plays.
The surge in precious metals prices points to ongoing hedge demand, supporting some allocation to gold-linked assets as a portfolio stabilizer. With higher services and housing weights in the new CPI, investors should track wage and rent trends more closely than before, since these will increasingly drive policy signals.
The addition of rural housing and online price data makes inflation turns show up faster, meaning market expectations may adjust more quickly after each CPI release. Finally, lower food weight should reduce inflation volatility overall, but rising state-level inflation dispersion increases the value of regional and sector-specific stock selection over broad index bets.