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February's headline WPI of 8.3% surprised market expectations of 7.8% as core
manufacturing inflation surprised to the upside. Seasonally adjusted mom core
manufacturing product inflation reached record levels for the 2004-05 inflation series.
February headline yoy WPI of 8.3% vs Bloomberg consensus of 7.8%
�� Yoy WPI inflation accelerated a bit from the 8.2% recorded in January 2011, and was
significantly higher than the Bloomberg consensus expectation of 7.8%. Total food
inflation (primary and manufactured) declined to 6.5% from 9.3% in January driven by the
decline in primary food inflation to 10.6% from 15.6%.
December inflation numbers revised upward
�� December yoy WPI inflation was revised up to 9.4% from 8.4%. Total food
(primary and manufactured) inflation was revised to 9.9% from 8.6% with core
manufactured products inflation revised to 6.1% from 5.3%.
Seasonally adjusted core manufacturing inflation at record levels
�� Yoy core manufacturing inflation (excluding food products) reached 6.1% in
February, up from 4.8% in January. On a seasonally adjusted basis, the core
manufacturing price index increased 1.6% from January - the largest mom increase in
the 2004-2005 core manufacturing index. On a non-seasonally adjusted basis, the index
increased 1.5% mom, with broad based price increases across different groups, with
textiles up 2.7%, chemicals up 1.7%, and basic metals, alloys and metal products up
1.7%.
February data suggests inflation pressures are getting entrenched
�� Though the recent let up in commodity prices should help inflation readings on the
margin, the February core manufacturing inflation data does suggest that inflation
pressures are getting generalized and more entrenched in the economy. As such, we
think the RBI will need to raise rates by at least 75bp this calendar, with a 25bp rate hike
at the upcoming March 17th meeting a given.
�� Given the February inflation readings, we think the March headline WPI print will be
closer to 8% rather than the 7% target of the Reserve Bank of India.
Staying cautious on the markets/financials with liquidity expected to tighten
�� The Nifty Index is up around 6-7% from its lows in mid-February. We think this recent
inflation data (especially the tick up in core inflation) suggests a cautious near-term
stance on the markets. With liquidity expected to get tighter on the margin through the
end of the month (refer Lower gov't cash helping liquidity, dated 14 March 2011), we
would be tactically cautious on the financials too.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
February's headline WPI of 8.3% surprised market expectations of 7.8% as core
manufacturing inflation surprised to the upside. Seasonally adjusted mom core
manufacturing product inflation reached record levels for the 2004-05 inflation series.
February headline yoy WPI of 8.3% vs Bloomberg consensus of 7.8%
�� Yoy WPI inflation accelerated a bit from the 8.2% recorded in January 2011, and was
significantly higher than the Bloomberg consensus expectation of 7.8%. Total food
inflation (primary and manufactured) declined to 6.5% from 9.3% in January driven by the
decline in primary food inflation to 10.6% from 15.6%.
December inflation numbers revised upward
�� December yoy WPI inflation was revised up to 9.4% from 8.4%. Total food
(primary and manufactured) inflation was revised to 9.9% from 8.6% with core
manufactured products inflation revised to 6.1% from 5.3%.
Seasonally adjusted core manufacturing inflation at record levels
�� Yoy core manufacturing inflation (excluding food products) reached 6.1% in
February, up from 4.8% in January. On a seasonally adjusted basis, the core
manufacturing price index increased 1.6% from January - the largest mom increase in
the 2004-2005 core manufacturing index. On a non-seasonally adjusted basis, the index
increased 1.5% mom, with broad based price increases across different groups, with
textiles up 2.7%, chemicals up 1.7%, and basic metals, alloys and metal products up
1.7%.
February data suggests inflation pressures are getting entrenched
�� Though the recent let up in commodity prices should help inflation readings on the
margin, the February core manufacturing inflation data does suggest that inflation
pressures are getting generalized and more entrenched in the economy. As such, we
think the RBI will need to raise rates by at least 75bp this calendar, with a 25bp rate hike
at the upcoming March 17th meeting a given.
�� Given the February inflation readings, we think the March headline WPI print will be
closer to 8% rather than the 7% target of the Reserve Bank of India.
Staying cautious on the markets/financials with liquidity expected to tighten
�� The Nifty Index is up around 6-7% from its lows in mid-February. We think this recent
inflation data (especially the tick up in core inflation) suggests a cautious near-term
stance on the markets. With liquidity expected to get tighter on the margin through the
end of the month (refer Lower gov't cash helping liquidity, dated 14 March 2011), we
would be tactically cautious on the financials too.
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