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India Equity Research Reports, IPO and Stock News
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● With policy rates likely to end at higher levels than we
anticipated a few months ago and given the now bleaker
outlook for global growth, we have revised down our 2011 and
2012 GDP growth forecasts to 7.2% and 7.3%, respectively (in
Asia contagion, published earlier today), from 7.5% earlier.
● Have we seen the end of policy rate hikes? We continue to
expect RBI to hike 25 bp at the 16 September meeting, and we
are not yet entirely ruling out one last 25 bp hike in October.
● RBI appears worried about the risk that high inflation might get
embedded in inflation expectations. Therefore, at least in the
near term, RBI looks willing to sacrifice some growth.
● We expect RBI to begin cutting the repo rate in early 1Q
FY12/13 (2Q CY12)
Downward adjustment to 2011 and 2012 growth forecast
Given that policy interest rates are likely to edge up to levels higher
than what we expected a few months ago, and with the small but
additional drag from what should be now slower export growth, we are
adjusting our growth forecasts for 2011 and 2012 to 7.2% and 7.3%,
respectively, from 7.5% earlier for both years. Investment spending is
likely to be affected more consumption is likely to be affected less,
given that the latter is not really leveraged.
While consensus' growth estimates for 2011 have edged lower
recently to 7.7%, for 2012, our growth outlook is well below consensus
estimates of 8.1%. We believe that the impact on growth from the
sharp increase in interest rates will be felt not just in 2011 but also
through 2012, given the usually long lags with which higher policy
interest rates impact real activity.
Have we seen the end of policy rate hikes? Not yet
We continue to expect RBI to hike 25 bp at the 16 September meeting
and we are not yet entirely ruling out a last hike in October, although it
has become a close call. In sequential terms, there has been slight
improvement in the trend in WPI inflation. But in YoY terms, WPI
inflation looks set to remain high at ~9% till December. And RBI
appears worried about the risk that high headline inflation might get
embedded in inflation expectations. Therefore, at least in the near
term, RBI looks willing to sacrifice some growth.
Indeed, in its most recent assessment in the ëAnnual Reportí
published on 25 August, the RBI acknowledged that a downward bias
had crept in to its 8% growth forecast for 2011, but the overall
emphasis of the report still leaned towards high inflation concerns. We
expect RBI to begin cutting the repo rate in early 1Q FY12/13 (2Q
CY12).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● With policy rates likely to end at higher levels than we
anticipated a few months ago and given the now bleaker
outlook for global growth, we have revised down our 2011 and
2012 GDP growth forecasts to 7.2% and 7.3%, respectively (in
Asia contagion, published earlier today), from 7.5% earlier.
● Have we seen the end of policy rate hikes? We continue to
expect RBI to hike 25 bp at the 16 September meeting, and we
are not yet entirely ruling out one last 25 bp hike in October.
● RBI appears worried about the risk that high inflation might get
embedded in inflation expectations. Therefore, at least in the
near term, RBI looks willing to sacrifice some growth.
● We expect RBI to begin cutting the repo rate in early 1Q
FY12/13 (2Q CY12)
Downward adjustment to 2011 and 2012 growth forecast
Given that policy interest rates are likely to edge up to levels higher
than what we expected a few months ago, and with the small but
additional drag from what should be now slower export growth, we are
adjusting our growth forecasts for 2011 and 2012 to 7.2% and 7.3%,
respectively, from 7.5% earlier for both years. Investment spending is
likely to be affected more consumption is likely to be affected less,
given that the latter is not really leveraged.
While consensus' growth estimates for 2011 have edged lower
recently to 7.7%, for 2012, our growth outlook is well below consensus
estimates of 8.1%. We believe that the impact on growth from the
sharp increase in interest rates will be felt not just in 2011 but also
through 2012, given the usually long lags with which higher policy
interest rates impact real activity.
Have we seen the end of policy rate hikes? Not yet
We continue to expect RBI to hike 25 bp at the 16 September meeting
and we are not yet entirely ruling out a last hike in October, although it
has become a close call. In sequential terms, there has been slight
improvement in the trend in WPI inflation. But in YoY terms, WPI
inflation looks set to remain high at ~9% till December. And RBI
appears worried about the risk that high headline inflation might get
embedded in inflation expectations. Therefore, at least in the near
term, RBI looks willing to sacrifice some growth.
Indeed, in its most recent assessment in the ëAnnual Reportí
published on 25 August, the RBI acknowledged that a downward bias
had crept in to its 8% growth forecast for 2011, but the overall
emphasis of the report still leaned towards high inflation concerns. We
expect RBI to begin cutting the repo rate in early 1Q FY12/13 (2Q
CY12).
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