In May, retail inflation mold came at 6.30 percent, much higher than 4.23 percent April. Wholesale inflation also saw a strong increase in May, coming at 12.94 percent against 10.94 percent in April.
Increasing inflation has been marked as one of the greatest concerns faced by the equity market by many analysts and market participants lately.
“Increasing inflation is a major concern for the market. Print CPI inflation to be able to show that inflation can exceed RBI’s target except reverse in June and July. Increased inflation can limit accommodative monetary policy pro-growth of RBI,” VIJYAKUMAR’s VK in Geojit Financial Services.
Shankar Sharma, VC and MD together the first global, told MoneyControl a few days ago that inflation and hardening of the results of the bonds produced was the biggest risk for the Indian market.
“Risk to India is currently a truly inflation problem. If somehow contained and bond yields do not rise, I think we will enjoy a very durable bull market in India without hesitation. I mean, I am clear enough that the equality of risk benefits is very tilted In the direction of the current prize, “Sharma said in an interview with MoneyControl.
Inflation is likely to continue to increase in FY22. “With the price of food remains high and the energy price is continuous higher, we continue to see the scope of CPI inflation to stay close to the top end of the band, track CPI in June 2021 to around 6.6 percent year-on-year,” Rahul said Bajoria, Head of Indian economist, Barclays.
On June 4, the Governor of Bank of India’s reserve (RBI) Shakuntala DAS said CPI inflation for FY21-22 was projected at 5.1 percent. For the first quarter of TA 22, inflation is expected to 5.2 percent, Q2 5.4 percent, Q3 4.7 percent and for the fourth quarter estimate is 5.3 percent.
Although the RBI has stated that the focus will increase, consistent inflation mold will be the cause.
“High global commodity prices, increased global inflation trends, WPI inflation in adolescents and sharp volatility from the causal retail inflation for RBI, which is committed to supporting growth,” said Broker and Broker Anand Rathi shares.
“Most recent recovery of growth is recently taken into account with low effects and stimulus. Thus, monetary policy accommodation is likely to continue for now. However, unless inflation is domestined, the extent to which accommodation can go down,” said the broker.
Nikhil Gupta, Chief Economist at Motelal Oswal Financial Services, said the increase in inflation which was higher than the higher than expected was about but it was impossible to produce monetary tightening. This also overrides further easing.
Sleep market with inflation?
While inflation remains a major concern for the market, the sensex and nifty equity benchmarks hit their new highest amounting to 52,869.51 and 15,901.60, in intraday trading on June 15.
It seems that the market does not focus on higher inflation and take the convenience of Covid-19 falling cases, the steps opened announced by countries, anticipating that good monsoons will help maintain food inflation checks.
“The current market atmosphere is high because it falls Covid cases, eliminates positive global locking limits and gestures. However, rapid increase in inflation is somehow ignored by the road. Spree purchases can last for some time due to positive expectations. Stock prices in certain heavy class stocks , “said Vishal Balabhadruni, Capitalvia Global Research.
“The reason why the inflation risk is ignored is due to a lack of certain triggers. The Q4 results from 2020-2021 have been good and therefore they remain floating even in the second wave of pandemic. Influence of inflation is expected to be seen in Q1 and Q2 of the income of 2021-2022,” Baabhadruni said.
Shrikant Chouhan, Executive Vice President, Equity Technical Research in the Securities Box said the market focused on the US Fed announcement on Wednesday.
“There is no headline anything, but I feel clarification from NSDL and Adani Group is the reason for entertaining. There is one thing where the market participants who focus on is a Fed meeting due on Wednesday. Participants expect a neutral attitude from the Fed’s head and That is the reason the market moves up, “Chouhan said.
Technically, the market is traded in new areas and it also supports momentum.
“Nifty continued the bullish track and seemed to be heading to 15900-16000. Although some of the twitter sessions, Nifty has succeeded in respecting the support rate of 15.700-15,750. As long as we do not destroy it based on closure, this trend is here to stay,” said Manish Hathiramani, a merchant Exclusive index and technical analyst, Deen Dayal Investment.
The best way to drive this trend is to accumulate buying the buy on the dip. It would be the wisest way to be part of a bigger trend, he said.