Rise in Retail Inflation: Should investors be worried?

Retail inflation in India accelerated to 5.55 percent annually in November from a four-month low of 4.87 percent in October, according to data issued recently by the Ministry of Statistics and Programme Implementation.

Both the rural and urban inflation rates increased from 4.62 percent and 5.12 percent in the same month last year to 5.85 percent and 5.26 percent, respectively. A higher cost of living and, thus, a decrease in purchasing power are caused by rising inflation. People’s real incomes decrease as inflation rises, which lowers returns net of inflation. The percentage has been within the 2–6% tolerance range set by the Reserve Bank of India (RBI).

In November, the inflation rate for vegetables was 17.7%. Furthermore, the fuel and light inflation decreased by (-)0.77%. In the meantime, October saw a 16-month high of 11.7% for factory output as determined by the Index of Industrial Production (IIP), thanks to increases in manufacturing, mining, and other sectors.

According to Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “three factors are driving the market: (i) expectations of political stability following the Lok Sabha election in 2024; (ii) the steady decline in 10-year yields of US bonds, which has converted foreign portfolio investors (FPIs) into buyers; and (iii) strong domestic macro.”

How Can I Determine India’s Inflation Rate?

In India, the consumer price index (CPI) and the wholesale price index (WPI) are the two indices used to calculate inflation. These two track monthly inflation while accounting for variations in the methods used to determine changes in the cost of goods and services. The research aids in the government’s and the Reserve Bank of India’s (RBI) comprehension of market price fluctuations and consequently helps in keeping track of inflation.

Do investors need to be concerned?

Experts believe that while core inflation is likely to have remained consistent and an increase in inflation print is generally anticipated, an increase in retail inflation print is unlikely to have a negative impact on market sentiment.

 

Links

https://pib.gov.in/PressReleseDetailm.aspx?PRID=1985492

India’s retail inflation surges 5.5 per cent in November from 4.8 per cent in October

Retail Inflation Rises to 5.55% in November

Inflation Rate In India: December 2023 Data 

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