Dance
SENIOR MEMBER
- Joined
- Jul 20, 2010
- Messages
- 4,850
- Reaction score
- 0
India’s Inflation Exceeds 9% for 11th Month, Reducing Scope for Rate Pause
India’s inflation exceeded 9 percent for an 11th straight month, crimping the central bank’s scope to keep interest rates unchanged and shield the economy from a faltering global recovery.
The benchmark wholesale-price index rose 9.73 percent in October from a year earlier, the commerce ministry said in a statement in New Delhi today. That compares with a 9.72 percent jump in September and the median forecast of 9.65 percent in a Bloomberg News survey of 19 economists.
Asian nations from Indonesia to South Korea are either cutting rates or keeping them on hold to protect expansion as Europe’s debt crisis threatens to trigger a global slump. India’s central bank last month signaled it’s nearing the end of monetary tightening, provided inflation slows, after it raised rates for the 13th time since mid-March 2010.
“Prices are not coming off,” said Madan Sabnavis, chief economist at Mumbai-based ratings company Credit Analysis & Research Ltd. “The RBI will have to probably revisit its guidance if inflation remains elevated.”
The BSE India Sensitive Index declined 0.4 percent at the close in Mumbai. The yield on the 8.79 percent government security due November 2021 rose two basis points, or 0.02 percentage point, to 8.97 percent. The rupee fell 0.4 to 50.29 per dollar.
The currency has tumbled more than 11 percent this year, a decline the central bank has said risks stoking inflation.
Fuel Costs
Indian Oil Corp., the nation’s biggest refiner, increased local gasoline prices on Nov. 4 for the third time in six months to stem losses, saying the rupee’s decline boosted costs.
The Reserve Bank of India on Oct. 25 said that its monetary tightening will help curb inflation and that the likelihood of a rate action in the December policy meeting is “relatively low.”
India’s inflation will start to decline from December and ease to 7 percent by March before moderating further in the first half of the next fiscal year starting April 1, according to the central bank. Beyond December, “if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” the Reserve Bank said.
RBI Deputy Governor Subir Gokarn said the October inflation data was on expected lines and there is no reason for a change in the guidance put out by the central bank in its monetary policy last month.
“Our guidance in October policy was based on current expectations of growth and inflation,” Gokarn told reporters today. “We haven’t seen anything after that, which might suggest that we need to revise that guidance based both on growth and inflation.”
Growth Forecast
The Reserve Bank predicted India’s economy will expand 7.6 percent in the year ending March 31, lower than the 8 percent it estimated earlier.
Governor Duvvuri Subbarao has increased the central bank’s repurchase rate by 375 basis points since the start of 2010. That’s the fastest round of increases since the monetary authority was established in 1935, Bloomberg data show. The repurchase rate is 8.5 percent.
The rate rises have started to hurt consumer demand. India’s industrial production grew 1.9 percent in September from a year earlier, the slowest pace in two years. India’s automakers on Oct. 10 cut their car sales growth forecast for a second time this year as companies including Honda Motor Co. and Ford Motor Co. faced lower demand.
Subbarao said last month that the central bank gave the guidance on rates to help boost investment.
http://www.bloomberg.com/news/2011-...11th-month-reducing-scope-for-rate-pause.html
---------- Post added at 10:58 AM ---------- Previous post was at 10:57 AM ----------
India Shares End Down; Inflation, Poor Corporate Results Weigh
MUMBAI (Dow Jones)--Indian shares ended lower for a third straight session Monday as persistently high inflation and poor quarterly results, including from auto major Mahindra & Mahindra, tempered trading sentiment.
Advances in Asian and European indexes did little to support local shares. Regional markets climbed on signs of stability in the euro zone after Italy appointed economist Mario Monti as premier-designate--a move investors view as a step toward containing Europe's debt impasse.
The Bombay Stock Exchange's Sensitive Index fell 74.08 points, or 0.4%, to end at 17,118.74, after trading between 17,094.43 and 17,391.99 during the day. The index rose 1.2% intraday.
On the National Stock Exchange, the 50-stock S&P CNX Nifty lost 20.50 points, or 0.4%, to finish at 5,148.35.
The BSE's provisional cash market trading volume fell to INR23.50 billion from Friday's INR26.14 billion. Decliners outnumbered gainers 1,985 to 865, while 94 stocks were unchanged.
"The equity market's depth continues to remain tenuous," said Sandesh Kirkire, chief executive at Kotak Mutual Fund. "The continued buoyancy in inflation remains the key concern for the domestic economy watchers," he added.
India's inflation remained above 9% for the 11th straight month in October, accelerating 9.73%. The number was a touch above the estimate of 9.65%. This, after the Reserve Bank of India raised interest rates 13 times since March 2010.
"Investors are divided on the rate cycle reversing. A few believe that interest rates will have to decline, but we are not sure as to when this reversal will start and to what extent," a trader said.
Rate-sensitive stocks fared worse than others with the BSE Auto falling 2.0%, the realty index down 2.6% and the consumer durables index lower by 2.1%.
Utility vehicle-maker Mahindra & Mahindra fell 5.7% to INR790.40 after posting a 3% drop in its July-September net profit.
Other major losers included Reliance Industries, down nearly 1.0% to INR875.15, and Tata Steel, off 4.0% at INR412.65.
Gains in Infosys, which rose 1.2% to INR2,808.45, and Bharti Airtel, which climbed 2.5% to INR405.30, supported the Sensex. The IT Index closed 0.7% up on hopes of stability in Europe.
Vijay Mallya-owned Kingfisher Airlines, not part of the Sensex, rose 8.7% to INR21.35 on reports that the company's board will consider a proposal to cut its debt by more than half by selling property and converting loans from its parent company into equity among other measures. The scrip fell 9.7% in the last one week.
-By Khushita Vasant, Dow Jones Newswires; 91-22-6145-6122; khushita.vasant@dowjones.com
India Shares End Down; Inflation, Poor Corporate Results Weigh - WSJ.com