Abstract: The paper discusses the correlation between real stock return and inflation rate in Chinese Mainland market based on Markov Regime Switching Model. According to the result of empirical analysis, there exists a positive cointegration relationship between real stock index and CPI. Cointegration error has a significantly correction effect on short-time fluctuation of CPI. In low inflation regime, there exists a positive contemporaneous correlation; and in high inflation regime, a negative but weak contemporaneous correlation exists. The correlation in the short term is not significant in statistics.