Making Sense

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 ~...

Inflation print comes lower than expected India Dec CPI came in lower than consensus estimates with prices rising 5.72% yoy (exp 5.88% CPI est ). The print lower was driven by disinflation in food and beverages where prices fell 1.35% mom. However, the core component, CPI excl f&b and fuels & lighting, continues to be sticky at 6.10%.  Prices slowed for food (4.19% vs 4.67%), pushed down by a 15.1% fall in vegetables; clothing and footwear (9.58% vs 9.83%); and housing (4.47% vs 4.57%). On the other hand, prices rose faster for fuel and light (10.97% vs 10.62%), pan, tobacco, and intoxicants (2.55% vs 2.02%), and miscellaneous (6.17% vs 6.07%) * The 5.7% Dec print , alters the Q4 FY 23 inflation trajectory to an average of 5.36%.  RBI projects CPI inflation for Q1:2023-24 at 5.0 per cent and for Q2 at 5.4 per cent.  The current disinflation is encouraging but the core component continues to be sticky. RBI may hike repo rate by 25 bps in the forthcoming policy...