Higher Inflation Reduces Hopes Of Rate Cut

It seems that the scenario seems to be getting difficult for the Indian equity markets. While the global cues have not been very positive, and if the WPI data announced for the Month of September is anything to go by, even the domestic data on the macro front is also not looking good. The WPI for the month of September 2013 stood at 6.46% showing an increase for the fourth consecutive month in a row.

If we take a look at the factors that have contributed to the rise, it is mainly on account of onion prices and even the vegetable prices. The inflation, based on wholesale price index (WPI) was at 6.1 per cent in August and 5.85 per cent in July. A  poll of economists had pegged the number at 6 percent. The core inflation rose to 2.1 percent versus 1.9 percent (month on month). Meanwhile, July WPI was revised to 5.85 percent versus 5.79 percent (prov) earlier. As per data released by the government today, the food inflation stood at 18.40 per cent in September over the same month last year. The food prices had shot up 18.18 per cent in the previous month.

Now there were certain expectations that the RBI may ease the liquidity as IIP had expanded less than the estimates. But the focus of the RBI has been on reducing the inflation. Hence we feel, there is not going to be any easing of liquidity when the RBI meets on 29th October.