While it sees GDP growth to accelerate, it feels the recovery is already priced in. Goldman Sachs, too, recently downgraded India to market weight. Moreover, the RBI has begun the withdrawal of its stimulus programme with a visible reduction in banking system excess liquidity,” said CLSA’s Alexander Redman. We are now back in such an episode of energy pricing for the first time since 2013. “For at least the past two decades, elevated energy prices have been closely associated with phases of Indian equity underperformance. and several brokerages have already raised concerns, following this rally.ĬLSA has become the latest to lower its weightage on India, saying it was calling time on the 20-month rally in India’s equities. Since April 2020, its up a whopping 120 per cent. The BSE Sensex is up over 38 per cent in the past one year.
But there are many who believe that the Fed is behind the curve and that the entrenched inflation will force the Fed to accelerate tapering and advance rate hikes,” he added.Īn earlier than expected interest rate hike and faster reversal of the easy money policy by the Fed could lead to fund outflows from emerging markets, including India, which will have a bearing on the stock markets. “The Fed still believes that the spike in inflation is caused by supply-side issues and, therefore, is transient. Vijayakumar, chief investment strategist at Geojit Financial Services. This has the potential to spill over to global commodity inflation,” said V.K. In China too, producer price inflation has risen to 13.5 per cent. “These (US inflation) numbers are well above most forecasts. While the Fed has maintained that inflation is transitory, many believe that due to the quicker-than-expected rise in inflation, it may have to raise interest rates earlier than expected. Similarly, the Federal Reserve (US central bank), too, will start tapering its monthly asset purchases from November, starting with $15 billion a month. In recent months, the RBI has already started mopping excess liquidity in the system via variable reverse repo rate auctions. “With higher-than-expected inflation in October, upside risks and need for policy normalisation, we expect the RBI to start tightening soon,” said Sujan Hajra, chief economist at Anand Rathi Share and Stock Brokers. This rise in inflation could only hasten that process, say analysts. Central banks had announced plans to begin unwinding their stimulus measures as economies recovered. In general, inflation signs are visible in most major markets. The RBI’s comfort band is within 2-6 per cent.
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could even see (CPI) inflation rise towards 6.2 per cent plus later in the fiscal year,” said Madhavi Arora, lead economist at Emkay Global Financial Services, which revised its full year forecast upwards by 25 basis points to 5.5 per cent. “Despite base effect, still-high fuel costs, input cost pressures and seasonal turn in some food prices in coming months etc. India’s wholesale inflation touched a five-month high of 12.54 per cent in October, data released on Monday showed.
In Japan, wholesale inflation hit a 40-year high.īack home in India, consumer price inflation (CPI) rose marginally to 4.48 per cent in October from 4.35 per cent in the previous month and 7.61 per cent a year earlier. In the Euro zone, inflation touched 4.1 per cent, hitting a 13-year high. The consumer price inflation in the US hit 6.2 per cent in October, the highest year-on-year jump since November 1990. As oil prices have increased, and containers have been in a shortage, logistics costs have gone up too. Prices of metals as well as many raw materials that go into consumer goods have shot up this year. Crude oil in October topped $80 a barrel, highest since 2014.
As the economies have reopened, demand for products and services has shot up across markets and that in turn has cranked up prices. The pandemic also led to global central banks pumping in trillions in stimulus packages to cushion the economic fallout of COVID-19. The pandemic disrupted global supply chains. In several European countries, cases have surged once again in the last few weeks. Inflation – one word that central bankers perhaps don’t want to hear right now at a time economies are just recovering from the COVID-19 shock and uncertainties still remain on when the pandemic is well and truly over.