Making Sense

In the India Week Ahead , I estimated CPI print at 5.60%. The CPI release showed CPI for Dec at 5.69%. FY24 Q3 average CPI is seen at 5.37% which is lower than RBI projection of 5.60% for the quarter. The headline inflation was driven by elevated Food and Beverages segments with the usual culprit seen as Cereals, Fruits, Vegetables, Pulses and Products and Spices. Oil and Fats was the only category that showed sharp deceleration in prices from a year ago. General Index Wt YoY Growth 1) Food and beverages 45.86 8.70% 2) Pan, tobacco and intoxicants 2.38 3.65% 3) Clothing and footwear 6.53 3.61% 4) Housing 10.07 3.63% 5) Fuel and light 6.84 -0.99% 6) Miscellaneous 28.31 4.07% India's Core Inflation grew 3.89%, exhibiting disinflation, falling to the lowest level...

India CPI for the month of November came in below market estimates of a reading of 5.70%. November CPI came in at 5.55% yoy and 0.54% mom.  Cereals (~ 10% wt rose 10% yoy) , Fruits (~ 3% wt rose 11% yoy) , Vegetables (~ 6% wt rose 18% yoy) , Pulses (~2.4% wt rose 20% yoy) and Spices (~2.5% rose 22% yoy) were the known culprits. Oil and fats prices (~3.6% wt) were significantly down, -15% yoy. Core CPI came in lower at 4.11% yoy.  What does this means for Rates going forward? Usually the month of December sees disinflation, averaging - 45 bps mom which translates to a reading of 5.56% yoy. If Dec CPI were to come along 5.50% number, the Q3 FY24 CPI will average 5.3% , 30 bps lower than the RBIs guidance. The Q4 CPI could average 4.80%, much below RBIs 5.20%.  As mentioned in my earlier post and with the current CPI data coming softer than expected, I believe we could see 75 - 100 bps of cuts in FY 2025. IIP rose 11.75% yoy in the month of Oct 2024 with Manufacturing (wt ~...

India CPI came in below consensus estimates of 5.5%. Headline number came in at 5.02% yoy and Core CPI number (excl F&B + Fuel and Light) came in at 4.53%.  Headline number has decelerated from a peak of 7.44% in July to 5.02% in Sep 2023. The Q2 inflation averaged 6.43% in line with RBI estimates. Under the food category, cereals, pulses and spices continue to be sticky. The core print has been steadily decelerating from the 6.00% peak seen in Feb 2023 to 4.53%.  With the current deceleration, my estimates for Q3 average 5.36% (RBI estimates 5.60%) and for Q4 average 4.80% (RBI estimates 5.20%). Next Financial Year Q1 will be sticky around 5.07% and Q2 will be closer to 4.2% average.  Fed Fund rates will also be an important determinant of domestic rate policy. Fed Fund Futures Market are pricing in a full rate cut by June. Assuming the current interest rate trajectory plays out in the US as per market pricing and domestic inflation averages 4.80% by Q4 of this FY, R...

As I have been writing in the past few posts, the trajectory of inflation is lower.  If you think about it, Inflation is nothing but percentage change in prices paid over the prior period. With the disruption caused in prices of energy and other commodities post Russia - Ukraine War and subsequent sharp declines, the base effect helps bring the headline print lower. For the month of April, the headline CPI rose 4.76% yoy while the core CPI which had been sticky around the 6% declined to 5.20% yoy. Both the numbers bring much needed comfort to the RBI. Sequentially, fuel and lighting declined mom while all other categories showed mom increases. With the April month's release, CPI inflation is projected to come in at 3.93% for March 2024 and remain closer to the 4% level for FY 25. My own estimates are lower than RBI projections of 5.20% by Q4 FY 24. My estimates call for a average inflation reading of 4.42% for FY 24.  If RBI inflation numbers evolve as per guidance, then ...

 Hi, Just been very caught up with some personal work and hence not had a chance to write. Today's day is lined up with a host of data releases. India - March CPI Inflation consensus estimates call for a reading of 5.80% following previous 6.44%. My own estimates call for a reading of 5.65%. The disinflation is lead by fall in prices of edible oils, cereals and vegetable prices. Core inflation has been sticky and will be keenly watched for direction of monetary policy. The market is currently pricing in 6.50% - 6.75% policy rate through this year followed by 2 rate cuts in 2024. Unless the data materially surprises on the upside, reckon the reaction to be muted as the evolving inflation trajectory is projected to be lower. RBI projects FY 23 - 24 inflation at 5.20%. Based on the inflation projections, real Rates are in positive territory.   March Industrial Output is estimated to grow 5.10% yoy  US - YoY US CPI Inflation (NSA) and YoY Core CPI (NSA) is expected ...

India CPI inflation for the month of February came in at 6.44% , marginally lower than 6.52% recorded in the month of January and above my estimates of 6.00% - 6.20%.  Let's quickly crunch the data: Mom headline CPI rose 0.21% . Only F&B (w. 45.86%) recorded negative momentum in prices but the rest of the basket saw mom rises. Housing (w. 10%) was up 0.80% mom; pan, tobacco and intoxicants plus clothing and footwear plus miscellaneous (w. 37% ) was up 0.40%, while food and beverages was down a marginal 0.06% (w. 46%). While declines were recorded in most of the F&B sub components, cereals, milk, spices, prepared mails recorded a rise.  Core CPI continues to be elevated at 6.10%. RBI projects Q4 FY 23 inflation at 5.70%. The Jan and Feb outturn at 6.52% and 6.44% was higher. My own estimates for March 23 inflation are at 5.62% which if the data comes in line will take the quarterly average at 6.16% above RBI's Estimates.  Market is pricing in another 25 bps of rate...