India’s inflation blasts past estimates; Sensex stocks drop

As the benchmark inflation rate has grown over estimates many of India’s stocks on the S&P BSE Sensex have declined.

For every two stocks which gained on the Sensex, three fell.

Overall, the index lost 0.2% – falling to 20,680.65 at noon on the 16th of December.

The country’s wholesale inflation was much faster than think tanks and economists had predicted last month, realising a 14-month high.

This has added pressure for another benchmark interest rate increase later this week in order to suppress price pressures.

The data

Government data showed wholesale prices rose 7.5% in November, over the 7% increase previously predicted by Bloomberg survey economists.

Jindal Steel & Power Ltd, a major Indian steel manufacturer, fell to a three-week low.

Motorcycle manufacturer Hero MotoCorp Ltd also decreased for the fourth day in a row.

Yet a few stocks managed an assent, and of particular note was GlaxoSmithKline Pharmaceuticals Ltd.’s 19% jump to a new record; fueled after the company’s parent expressed interest to grow its stake.

In addition, Infosys Ltd. – a local software exporter – rose 2%.

USD 2 per day

Consumer prices across India have also increased to 11.24% by November compared to the same date last year; much higher than the 10% gain analysts predicted.

Raghuram Rajan, Governor at the Reserve Bank of India (RBI), had previously stated intentions to fight inflation in India, where over 800 million nationals live on less then USD 2 per day.

“The RBI can’t afford to sit pat when you have inflation surging,” noted economist Suvodeep Rakshit, of Kotak Securities Ltd.

“The central bank faces a difficult task as a major part of inflation is driven by food prices, over which it has little control.”

Clarity needed

The RBI and the Federal Reserve (Fed) are to announce their new policy decisions on the 18th of December.

“The market will remain volatile until clarity emerges on the Fed and the RBI meetings,” Angel Broking’s head of institutional sales Mayuresh Joshi told Bloomberg TV India.

“The RBI may raise the repo rate by 25 basis points but that has been discounted. The market will react positively if there is light taper by the Fed.”

Below is a list of some related articles, guides and insights that you may find of interest.

Questions or Comments?

We love to get feedback from our readers. So, after reading this article, if you have any questions or want to make comments, send us a message on this site or our social media?

Don’t forget that you can also request the guides sent directly to your email inbox.