CPI inflation surprises on the upside as IIP remains tepid: Angel Broking

Views of Mr. Jaikishan J Parmar (Research Analyst, Angel Broking):

"The CPI inflation for the month of November came in sharply higher touching a 15-month high at 4.88% even as the IIP for October came in tepid at just about 2.2%. The CPI inflation was just about 3.58% in the previous month. This inflation level is also sharply higher than the RBI prescribed comfort level of 4% as a long-term average. The RBI had already warned about the sharp increase in inflation in its monetary policy in the aftermath of the higher HRA payable to government employees. The real surge in inflation came in rural inflation which sharply moved up from 3.36% to 4.79%. This is likely to force the MPC to put off rate cuts for the time being.

There was some solace on the IIP front. The mining sector showed a growth of 0.2% and manufacturing showed a growth of 2.5% while electricity was up by 3.2%. A total of 10 out of the 23 industries in the manufacturing space saw positive growth while the others registered negative growth. The combination of higher inflation and flat growth almost rules out any rate cut by the RBI in the next couple of monetary policies."

Source : Equity Bulls

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