HOME         WEBSITE         SUBSCRIBE           E-GREETINGS   
                               

Thursday, July 09, 2009

Inflation at -1.55%

Set to grow

The official Wholesale Price Index for 'All Commodities' for the week ended 27 June 2009 rose by 0.04% to 234.7 from 234.6 for the previous week. The annual rate of inflation, calculated on point-to-point basis, stood at -1.55% for the week ended 27 June 2009 as compared to -1.30% for the previous week and 12.03% during the corresponding week of the previous year. The high base effect has significant role to play in falling WPI.

The plunge in inflation is mainly attributed to fall in manufactured product index, which recorded 0.1% negative growth at 205.7 from 205.9 for previous week. The index for food product, paper and paper products, rubber and plastic products, chemicals and chemical products, basic metals alloys and metal products registered a declined from their previous week level. The index for food products group declined by 0.2% to 232.8 from 233.3 for the previous week due to lower prices of coconut oil (2%) and oil cakes and groundnut oil (1% each). The index for chemicals and chemical products group declined by 0.6% to 226.9 from 228.3 for the previous week due to lower prices of epoxy resins (35%), calcium ammonium nitrate n-content (16%) and methanol (3%). The index for basic metals alloys and metal products group declined by 0.2 % to 254.8 from 255.2 for the previous week due to lower prices of cast iron casting (12%), alloy steel casting (5%) and steel ingots (1%). However, the prices of zinc (1%) moved up. The index for 'Machinery & Machine Tools' group rose by 0.2 percent to 171.9 (Provisional) from 171.5 (Provisional) for the previous week due to higher prices of enamelled copper wires (10%).

On the other hand, index for textile group; non-metallic mineral products grew for the week ended 27 June 2009. The index for textiles group rose by 0.4 % to 143.7 from 143.1 for the previous week due to higher prices of hessian cloth (7%), hessian and sacking bags (4%) and woollen cloth (1%). The index for non-metallic mineral products group rose by 0.9 % to 222.8 from 220.9 for the previous week due to higher prices of cement (1%).

Another major index of primary articles rose by 0.3% to 258.5 from 257.6 for the previous week. Among the sub group the index for food articles group rose by 0.5% to 254.0 from 252.8 for the previous week due to higher prices of fish-marine (10%), arhar and fruits & vegetables (2% each) and urad and moong (1% each). In addition to this the index for non-food articles group also rose by 0.1% to 237.0 from 236.8 for the previous week due to higher prices of linseed (3%), raw wool (2%) and raw rubber, groundnut seed and raw cotton (1% each). However, the prices of niger seed (19%), sunflower (3%), copra (2%) and raw silk and rape & mustard seed (1% each) declined.

Though the wholesale price index has witnessed a negative growth for the fourth consecutive week, the end users are still worried due to elevated food prices. The double-digit growth rate in consumer price index is indicating added pressure on the daily consumption basket. The hike in minimum support price in 2008-09 has put ceiling on the prices of major food grain to come down.

The monsoon failure will further put upward pressure on rising food prices. India's huge farm economy may be hit by a bad drought if its annual monsoon rains remain weak with the window for planting crops closing by mid-July, a report from a US Agricultural Department (USDA) attache said. Also there are raised possibility that the formation of an El Nino weather anomaly in the equatorial Pacific Ocean may lead to a weakening of the annual Indian monsoon rains. Australia Bureau of Meteorology have suggested an El Nino event is developing across the Pacific Basin. The report published on 8 July 2009 said that leading climate models indicate that warming of the Pacific will continue for the next few seasons, with very little chance of the current development stalling or reversing. So how fast the warming takes place over equatorial Pacific Ocean may determine how the monsoon fares in India.

Further the growth in money supply and growth in disposable income as a result of change in individual income tax structure will boost inflation in medium term. Globally crude oil prices have already started to scaling up. Current negative inflation is a short-term event. Also the fuel price hike recently announced will also play its part in bringing inflation above sub zero level.

On a positive side, agriculture, the primary sector in India's GDP has received credit expansion in Union budget 2009-10. The target for agriculture credit flow has been increased from Rs. 2,87,000 crore last year to Rs. 3,25,000 crore for 2009-10 In short, budget had strong focus on agriculture sector supporting large working population. Expansion in credit will enhance the production activities in agri sector and somehow will ease pressure on agri commodity prices.

Posted by

Blog Archive

____________________________________________________________________________________________

Disclaimer - All investments in Mutual Funds and securities are subject to market risks and uncertainty of dividend distributions and the NAV of schemes may go up or down depending upon factors and forces affecting securities markets generally. The past performance of the schemes is not necessarily indicative of the future performance and may not necessarily provide a basis for comparison with other investments. Investors are advised to go through the respective offer documents before making any investment decisions. Prospective client(s) are advised to go through all comparable products in offer before taking any investment decisions. Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the fund will be achieved. Information gathered & material used in this document is believed to be from reliable sources. Decisions based on the information provided on this newsletter/document are for your own account and risk.


In the preparation of the material contained in this document, Varun Vaid has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the Varun Vaid and which may have been made available to Varun Vaid. Information gathered & material used in this document is believed to be from reliable sources. Varun Vaid however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. Varun Vaid does not in any way through this material solicit any offer for purchase, sale or any financial transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice.


Varun Vaid, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on the basis of this material. All recipients of this material should before dealing and/or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice. The investments discussed in this material may not be suitable for all investors. Any person subscribing to or investigating in any product/financial instruments should do soon the basis of and after verifying the terms attached to such product/financial instrument. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. Please note that past performance of the financial products and instruments does not necessarily indicate the future prospects and performance there of. Such past performance may or may not be sustained in future. Varun Vaid, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation in the financial instruments/products/commodities discussed here in or act as advisor or lender / borrower in respect of such securities/financial instruments/products/commodities or have other potential conflict of interest with respect to any recommendation and related information and opinions. The said person may have acted upon and/or in a manner contradictory with the information contained here. No part of this material may be duplicated in whole or in part in any form and or redistributed without the prior written consent of Varun Vaid. This material is strictly confidential to the recipient and should not be reproduced or disseminated to anyone else.


Varun Vaid also does not take any responsibility for the contents of the advertisements published. Readers are advised to verify the contents on their own before acting there upon.


Published Credits goes to following sources & all the mentioned sources as footer below the published material- Bloomberg, Valueresearch Online, Capital Market, Navindia, Franklin Templeton, Kitco, SBI AMC, LIC AMC, JM Financial AMC, HDFC AMC, The Hindu, Business Line, Personal FN, Economic Times, Reuters, Outlook Money, Business Standard, Times of India etc.