India's headline inflation fell sharply to five-year low of 3.74% in August 2014 as compared to 5.19% in the previous month. It came below market expectations of 4.1%. June WPI inflation revised to 5.66% from 5.43% earlier.

"We expect headline WPI inflation to continue to moderate in the next four months on favourable base effects, lower global commodity prices, a stable exchange rate and the normalization of vegetable prices," said Sonal Varma, economist at Nomura Financial Advisory and Securities.

"However, headline WPI inflation may climb closer to its underlying trend (5-5.5%) in Q1 2015. Overall, we expect WPI inflation to average 5% y-o-y in FY15 compared with 5.9% in FY14," Varma  added.

Furthermore, the data show that pipeline price pressures remain in check, boding well for core CPI inflation. Additionally, with stable output prices and lower input costs, profit margins may also expand in the coming months, Varma opined.

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