Viewpoint Podcast - Ep 7: Outlook for the Consumer Price Index in India

03:44

Show Notes

Today let's have a talk about where Equity markets are headed the last quarter has been fairly volatile for the markets we have seen many days of highs and lows with a lot of Correction happening across many stocks particularly on the mid and the smaller cap stocks and particularly on certain themes that the market was quite bullish about so where do we head from here going forward you should expect the markets to be fairly volatile at least for the next few months till better Clarity emerges on one what is the earnings outlook for the market second what is the outlook for overall economic growth and third perhaps some bit of clarity with regards to the economic policies of the US given the change in government that they have had for us the second quarter results that just got completed and results were declared growth has been fairly tiid for the nifty50 set of companies profit Cod on a yearyear basis has slowed down to just about 600% YY this has resulted that in the trailing 12 mon profit growth coming down to just a little bit up in the mid te that's there going forward we think that the profit growth should recover this will be a function of one improved sales Outlook as demand picks up particularly in the third quarter where there is a lot of Festival related demand as well as a lot of activity on the real economy with regards to say construction and infrastructure projects which should pick up after the lull of the second quarter which was particularly impacted by the heavy rainfall as well as the lack of government spending due to the impending general election that's there incrementally as the government spending continues to pick up and investments into various projects continues we think the overall infrastructure related activity should continue to grow very well consumption should also pick up as the monsoons have been fairly good this year and we see early signs of that getting reflected in the demand conditions in the rural parts of the country as reported by many of the fmcg companies that's there the banking sector should also continue to do well as economic activity picks up resulting into an improved outlook for loan growth overall we think that as the earning recovery continues markets should stabilize and as the correction gets done in this mid and small cap space which had seen significantly higher bouts of valuation Market should resume their upward trajectory after a few months that's there however for the coming few months you should anticipate volatility to remain fairly High investors would do well to remain invested particularly in schemes that are in the large large in midcap and midcap space and focusing more on quality stocks rather than pure momentum stocks that's there.

Transcript

00:00 - 00:02

[outro jingle]

00:06 - 02:29

In the past month, there has been a notable shift in the outlook for the Consumer Price Index in India. Weather conditions have consistently posed a risk to food inflation, which significantly impacts overall retail inflation since food accounts for thirty-nine percent of the CPI basket. What is particularly striking is that the vegetable category, despite representing only six percent of the overall CPI, is extremely volatile and the biggest pain point presently. In contrast, other food categories such as cereals, pulses, spices, and milk are stabilizing and expected to ease with a strong harvest or output. In September, the headline CPI rose to five point five percent year-on-year, primarily driven by a staggering thirty-six percent increase in vegetable prices. The CPI for October is also expected to hover around the five percent mark. When excluding vegetables, food inflation has moderated to three point nine percent and overall headline inflation has stayed below four percent for three consecutive quarters. Notably, sixty percent of the items included in the CPI calculation show less than a four percent price increase. This data indicates that inflation is largely confined to a small number of products driven by supply issues. Beyond the base effects, the vegetable price fluctuations may require structural changes, such as improved cold storage to address ongoing supply challenges. Meanwhile, other food categories are cooling down and are likely to stabilize with a good crop yield. As a result, we anticipate potential food disinflation in quarter four. However, combined with the hawkish MPC commentary, the September CPI figures diminish the likelihood of a rate cut in December. If the vegetables don't correct meaningfully, it puts a call for the February rate cut at risk, too. We will be keenly watching out for trends in vegetables in the coming months.

02:30 - 02:35

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