Cheer for inflation?

Feb 22, 2016, 08:58 IST | Alex K Mathews

Though CPI inched up, WPI-based inflation fell for the 15th straight month

Range bound movements were seen in the domestic markets last week. The global markets were the major movers and shakers. Sensex and Nifty closed up around 3 per cent each on a weekly basis. Nifty has resistance at 7273, 7306 and chances of moving above these levels are very remote. On the other hand, support for Nifty lies at 7152 and 6949, a decisive move below these levels can bring the market down towards a panic situation.

Price statistics
Last Monday, the country’s wholesales prices came out for January, which fell for the 15th straight month. The Wholesale Price Inflation (WPI) declined 0.9 per cent annually and the data was at 0.73 per cent in December. The November figure was revised to -2.04 per cent from -1.99 per cent. The food articles inflation for the period under review was at 8.17 per cent compared to 6.02 per cent in December.

The primary articles inflation was at 4.63 per cent versus 5.48 per cent last month and manufacturing products inflation was -1.17 per cent compared to -1.36 per cent last month. Retail inflation for January also came out last week, which saw a rise for the fifth consecutive month. The CPI inched up to 5.69 per cent from 5.61 per cent in December. Retail food inflation for the month under review stood at 6.85 per cent compared to 6.4 per cent in December. Fuel inflation was at 5.32 per cent.

Key data
As the manufacturing sector continued to be in negative territory, the country’s Index of Industrial Production (IIP) for December contracted 1.3 per cent on a yearly basis. According to data, the cumulative industrial output for April to December 2015 was up 3.1 per cent and in November, it contracted 3.2 per cent, which was the sharpest fall in four years. In December, the manufacturing output declined 2.4 per cent whereas the mining and electricity output rose 2.9 per cent and 3.2 per cent respectively.

Consumer durables production posted a 16.5 per cent rise while consumer non- durables output fell 3.2 per cent in December. The contraction in imports, along with the exports of the country falling for 14 consecutive months made the trade gap to narrow to an 11-month low in January.

Exports were down 13.6 per cent to $ 21.07 billion and imports fell 11 per cent to $ 28.71 billion from a year ago period, leaving the trade deficit to $ 7.63 billion.

Earlier, the data was low in February 2015 at $ 6.84 billion. Gold imports rose 85 per cent to $ 2.91 billion last month as compared to a 179 per cent increase in December and oil imports were down 39 per cent to $ 5.02 billion.

Betting big
Moody’s investor services in the last week said, the Indian economy will grow at 7.5 per cent in 2016 and 2017 with not many problems. But the prevailing banks’ Non-Performing Asset (NPA), corporate debt and inflation may have its own role to play. On the other end, Japanese financial services firm Nomura said, the country might witness a 7.8 per cent growth in the next fiscal.

According to a study, mutual funds were seen increasing their exposure in many companies on a quarterly basis. Some companies which saw increase in the stake include Bata India, GMDC, Dish TV, Arvind LTD, Kansai Nerolac, Ramco cements, Finolex Industries, Pfizer and the Indian hotels. The MFs invested close to R 70000 crore into domestic equities in 2015 as compared to R 28000 crore and R 74000 crore in 2014 and 2013.

Global cues
On the global front, the markets remained in a mixed trend as of weak earnings report and crude oil prices. The positive moves on the markets were on the hope that central banks around the globe may step to support the economy. Rally in the banks supported the markets to an extent.

Nikkei manufacturing PMI, inflation, core inflation and CPI are the data on the Japanese front. Market manufacturing PMI, inflation, core inflation, industrial sentiment, business sentiment and consumer confidence will be triggers for European markets.

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