With retail inflation witnessing significant uptick in May, the Reserve Bank of India (RBI) is likely to maintain status quo in its August monetary policy review, according to a report. According to the SBI's research report- Ecowrap, inflation may remain elevated in the coming months due to several global and domestic factors. "We expect a status-quo in August. We believe RBI would still try to find a marriage of convenience of regulatory and developmental measures and monetary policy in August policy," the research report said on Wednesday.
Retail inflation inched up to 4.48 per cent in October due to an uptick in food prices, government data showed on Friday. The Consumer Price Index (CPI) based inflation was at 4.35 per cent in September and 7.61 per cent in October 2020.
The index is currently trading at 149 per cent of its historical P/B valuation, surpassing its previous peak of 125 per cent made in 2020-21.
There are glaring anomalies with Indian data and that could lead to wrong policy prescriptions.
Sources said Rajan will make the customary call on the Finance Minister on Monday, a day before he presents the policy.
'Whether I am optimistic or pessimistic is not the issue; I am just going by the evidence available.' 'The Indian economy and financial sector are now well-placed and very resilient in dealing with any kind of spillover coming from the external world.'
It is unlikely that the RBI will drop rates until the inflation rate drops below five per cent.
Global trends, macroeconomic data announcements and the start of the earnings season would be the major drivers for the equity markets in a holiday-shortened week, analysts said. Equity markets will remain closed on Thursday for Eid-Ul-Fitr. Trading activity of foreign investors, rupee-dollar trends and crude oil prices would also guide trends in markets.
'The actual price of petrol is Rs 35 and it jumps to Rs 88 because of government taxes.'
Inflation rate during August, the data for which is yet to be released, was likely to remain at about 7 per cent, said SBI Ecowrap.
Vegetables and fruits have weights of 1.74 per cent and 2.11 per cent, respectively, in the wholesale price index.
The government hopes of registering GDP growth rate ranging between 6.1-6.7 per cent in 2013-14.
While FMCG companies lose Rs 98,928 crore in m-cap, consumer durables stocks are down Rs 20,673 crore since November 8.
The current situation offers an opportunity for farmers to reinvest in agriculture.
'Yet the market didn't do all that badly because it was cushioned by domestic inflows.'
India is likely to grow by 7.5 per cent in the first quarter of the current financial year, driven by rising aggregate demand and non-food spending in the rural economy, according to an article in the RBI's May Bulletin released on Tuesday. The Indian economy has demonstrated marked resilience in the face of geopolitical headwinds impacting the supply chain, said an article on the state of the economy published in the May Bulletin.
The inflation in the food basket spiked to 7.89 per cent in October 2019 as against 5.11 per cent the preceding month.
Also says PSU banks divestment to be considered after improvement in governance
To cut interest rates, the central bank head has to open up a debate on inflation target revision.
Despite multiple headwinds at the start of 2023, the Indian markets delivered a strong performance, posting 19-20 per cent growth for the year. Even as new records were set, investor sentiment remains strong going into 2024, given the lower inflation, expectations of steady to lower interest rates, higher economic growth, and strong inflows. However, the overriding concern for most brokerages is valuations.
Among top losers that dragged down key indices were Infosys, TCS, Reliance, SBI, Tata Steel and ITC, falling up to 2.15 per cent.
The wholesale price-based inflation rose for the second consecutive month in February to 4.17 per cent, as food, fuel and power prices spiked. The WPI inflation was 2.03 per cent in January and 2.26 per cent in February last year. After witnessing months of softening of prices, the food articles in February saw 1.36 per cent inflation. In January it was (-) 2.80 per cent.
Selling in index heavyweights, including Infosys, TCS, ICICI Bank and Reliance Industries, dragged the benchmark indices into the negative for the second straight session, analysts said. Among the Sensex shares, Asian Paints fell the most by 3.9 per cent as analysts expressed concerns over rising competition in the domestic paints market following the entry of Aditya Birla group company Grasim Industries into the paints segment. IT shares Infosys, TCS, HCL Tech, Wipro and Tech Mahindra continued to slide amid inflation concerns in the US market.
The fast-moving consumer goods (FMCG) sector has underperformed the Nifty over the past year as its 20 per cent return is trumped by 29 per cent of the benchmark index. The FMCG index saw a 2.2 per cent drop in the last session, while the Nifty lost 1 per cent. FMCG is seen as a defensive segment. The demand for staples like personal care products, groceries and snacks tend to be stable. FMCG companies are consistent dividend-payers.
Investors will keenly watch US Fed meet starting Tuesday
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The Indian rupee touched record low of 65.52/dollar on Thursday and is down 16 per cent so far this year despite efforts by policymakers to prop it up.
The employment situation remains dire. Whatever can be done to promote greater low-skill employment should be pursued aggressively, advises former chief economic adviser Shankar Acharya.
Retail inflation rises to 4.41% in Sep on dearer food items
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As on Monday, the prices of many vegetables had fallen as much as 50% compared with those a month before, due to increased supply, following the arrival of winter crops in the markets.
The US Fed's rate cycle is set to turn later this year, but India is in a much better position than it was in 2013.
The forecast of deficient monsoon rainfalls scared farmers.
India's manufacturing sector growth climbed to a 16-year high in March on the back of the strongest increase in output and new orders since October 2020, amid reports of buoyant demand conditions, a monthly survey said on Tuesday. The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) surged to a 16-year high of 59.1 in March, from 56.9 in February, reflecting stronger growth of new orders, output and input stocks as well as renewed job creation. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.
RBI targets to keep inflation at 4 per cent, (+/- 2 per cent), and its rise beyond this comfort zone will put pressure on the central bank to hike rates.
Data suggests that households too are expecting inflation to subside, with the three-month-ahead and the one-year-ahead expectations declining by 40 basis points, reports Abhishek Waghmare.
Fruits, vegetables and eggs continued to witness deflationary trend during January this year, with their prices declining 4.18 per cent, 13.32 per cent and 2.44 per cent, respectively.
Lead indicators suggest that domestic current account deficit (CAD) is likely to reduce in 2023, while macro-economic stability has received a boost from inflation being brought back to the official tolerance band, according to the Reserve Bank of India's (RBI's) January 2023 Bulletin. "With the merchandise trade deficit reaching an all-time high of $83.5 billion in a quarter, and a rise in net outgo from the income account, the current account deficit increased to 4.4 per cent of GDP in Q2FY23," the State of the Economy article in the bulletin said. "It is noteworthy, however, that the CAD for Q1 was revised down from 2.8 per cent to 2.2 per cent on account of downward adjustment in Customs data.
Finance Minister Nirmala Sitharaman on Thursday said inflation management cannot be "singularly" left to the monetary policy as a majority of activities are outside its purview in the current context. Speaking at a seminar organised by economic think-tank Icrier, the finance minister said that both the fiscal policy and the monetary policy have to work together to contain inflation. Consumer price index (CPI) based inflation or retail inflation is ruling above the Reserve Bank's comfort level of 6 per cent since January.
Government's push for Make in India which focuses on select 26 sectors and improving the 'ease of doing business' will aid the manufacturing/industrial growth.
The most consistent wealth creators since 2008 are all consumer-facing companies, says Devangshu Datta.
The stock of consumer goods major Emami has corrected nearly 3.5 per cent since its 52-week high of Rs 546.25. On August 29, the stock closed at Rs 521.90 on the BSE. After underperforming the Nifty FMCG index for a long time, the stock is now doing a catch up and surged over 13 per cent in the past one month.
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