Indian economic data - IIP and Inflation

[Sanket]

The inflation numbers came and in it makes for some interesting reading. The consumer price index (CPI) stood at 5.07% and slightly eased from a 17 month high of 5.2%. The cycle of reducing interest rates is definitively over in my view.

The IIP fell from a November high of 8.8% to 7.1%

Good news is that 16 out of the 23 industries showed YoY growth.

What does this mean for the markets? Well, falling inflation is always good but the consensus view is that party may not last. Given the MSP announcement in the budget, this is expected to push up the inflation in the coming months. Another aspect to consider would be that the India Inc as a whole seems to be coming out from the Demonetization and GST funk.

Quoting CRISIL

The industry seems to be shedding away the weight of GST-related glitches behind and trying to get back lost momentum, as both domestic and global growth surge

But having said this the 10 year GOI yield remained high

Views welcome.

[TraderVenk]

I think market discounts what is obvious very quickly(if not already priced in). So what do u see beyond the obvious (like geroge soros said) & According to you how clear(or foggy) the wind screen is compared to the rear view mirror (as warren buffet said)

[Sanket]

@TraderVenk

I think market discounts what is obvious very quickly(if not already priced in). So what do u see beyond the obvious (like geroge soros said) & According to you how clear(or foggy) the wind screen is compared to the rear view mirror (as warren buffet said)

I am never one for quotes (although they are good). The market is gonna do what it does. But I think we are in for some good time in the long run i.e. aside from the noise.

[harshendrasingh]

One more factor that will probably effect the interest rate cycles here in India.

[Sanket]

Agreed, the era of cheap money is over. Inflation is back, central banks are unwinding bond buying. Now it’s time for some real stuff.