The rupee touched a one-week high versus the US dollar on Tuesday, tracking solid gains in local equities and persistent improvement in global risk tolerance. The Indian currency also gained on growing talk of policy stimulus from Europe and China in the foreseeable future.

The absence of any large dollar demand from domestic oil refining companies also worked in favour of the rupee today.

The main Indian stock indices today resumed trading after an extended weekend, taking off from where they had left last Friday when they completed three successive weeks of gains.

The NSE Nifty closed above the 5,400 mark for the first time since March 16 while the BSE Sensex surpassed the 17,800 levels. 

FII inflows have been pretty robust in the past couple of months. FII inflows during August so far stand at US$1bn, taking their total for 2012 to US$11bn.

The BSE Sensex rose 1.1% to end at the highest level in five months. The NSE Nifty was up 55 points or 1%. 

The Government said today that consumer prices eased a wee bit in July from the previous month. India’s CPI inflation (base year 2010) moderated to 9.86% yoy in July from 9.93% in June.

The moderation was mainly due to positive base effects on fuel inflation created by the hike in administered prices a year ago and a moderation in the miscellaneous category because of a decline in the cost of transportation services.

As a result, core CPI inflation (ex-food and fuel) moderated to 8.9% yoy from 9.2%. Food inflation inched higher to 11.5% yoy in July from 10.8% in June due to rising prices of cereals and pulses.

Globally, European stock indices gained as investors welcomed reports on possible introduction of fresh stimulus measures by the Chinese policy makers besides persistent talk of bond buying plans in the euro zone.

The euro rose to almost a two-week high against the US dollar and a six-week peak versus the Japanese yen in the overseas currency trading.

Asian markets ended mixed, with the Nikkei index in Japan down 0.2%, while the Hang Seng index in Hong Kong was almost unchanged. The Shanghai Composite in China was up 0.5%.

A European Central Bank (ECB) spokesperson said on Monday that it was absolutely misleading to report on decisions, which have not yet been taken and also on individual views that have not yet been discussed by the ECB's Governing Council, which will act strictly within its mandate. He was responding to a weekend news report that the ECB was weighing a plan to cap eurozone government bond yields by buying unlimited amounts of bonds.

Separately, Germany's Bundesbank has reiterated its opposition to the ECB’s reported plan to buy more sovereign debt. Comments by Bundesbank sparked concerns that European policy makers will struggle to agree on measures to address the debt crisis.

Luxembourg Prime Minister Jean-Claude Juncker is due to visit Greece tomorrow to discuss the country’s request for an extension to its fiscal adjustment program.

Greece’s Prime Minister Antonis Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Greek Finance Minister Yannis Stournaras said his government is still considering 11.5 billion euros ($14.2 billion) of spending cuts for the next two years. The so-called troika of the EC, ECB and IMF return to Athens early next month.

Spain’s 10-year yields declined to as low as 6.16% on Monday, the least since July 2. That compares with a euro-era record of 7.75% reached on July 25.