Todays Stock Market Summury - Chart of the Day 17 Jan 2017
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Talking about cyclical industries, commodities are the first thing that come to our mind. Commodity prices can have a huge impact on inflation data as well. As per the latest wholesale price index (WPI), WPI inflation accelerated to 3.39% in December 2016 as compared to -1.06% during the corresponding month of the previous year. For November 2016, WPI stood at 3.15%.
The rise in WPI inflation is mainly on the back of rising global commodity prices and an unfavourable base effect.
Can Inflation Come Back to Haunt the Economy?
Fuel and Power index rose sharply (on YoY Basis) on the back of the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) to reduce crude oil output. Even oil producers outside the group led by Russia agreed to reduce the output. The low base effect of last year also contributed to a sharp increase of fuel and power index.
Manufactured products inflation, which largely contributed to the uptick in December 2016 WPI came in at a 14 month high of 3.37%. However, food inflation has turned negative for the first time since August 2015 at -0.7% in December 2016 as against 1.54% in the previous month.
In the coming months, it looks like WPI could inch up and CPI might soften. The RBI is scheduled to hold the next meeting of the monetary policy committee on 8 February and is likely to keep a close watch on these numbers.
The International Monetary Fund (IMF) has cut its GDP growth forecast for India by a full percentage point to 6.6%. This is on the back of disruption caused by demonetisation. With this, India may lose the 'fastest growing major economy' tag to China in 2016-17.
In its World Economic Outlook (WEO) Update, the IMF said India is likely to grow 6.6% in FY17. The IMF also expects India's growth to pick up at a slower pace in FY18, at 7.2%, against its earlier estimate of 7.6%.
As per the IMF, the growth forecast trimmed for the current and next fiscal year primarily due to the temporary negative consumption shock induced by cash shortages and payment disruption associated with the recent currency note withdrawal and exchange initiative.
Earlier, the World Bank has lowered its economic growth forecast for India to 7% after taking into account the impact of demonetisation and the fall in private investments. Similarly, the growth projection by the Central Statistics Office (CSO) released earlier, has lowered economic growth to 7%. This is mainly due to an industrial slowdown and this doesn't include the impact of demonetisation.
With GST likely to be rolled out from 1 July 2017, it will be interesting to see how economic growth estimate pans out for FY18.
Talking about GST, as per the latest development, GST is set to be rolled out from 1 July instead of 1 April after the centre and the states struck a consensus on the contentious issue of sharing of administrative powers. The deferred implementation date gives some time for the industry to prepare after the shock of demonetisation. Immediate rollout of GST would have created disruption and discontinuity in the system.
What remains now are the rates for various goods and services which will be decided in the near future. The real benefit of GST comes from a 'level playing field'. A common floor tax across India means that the most efficient producer will win the consumer.
If you would like to dig deeper into the practical implications of GST, I strongly recommend you download Vivek Kaul's free report, What the Mainstream Media DID about NOT TELL YOU GST.
After opening the day in the green, the Indian stock market indices slipped into the red around noon time. IT, FMCG, and capital goods, stocks are leading the sectoral gains.
The BSE Sensex is trading lower by 37 points (down 0.14%) and the NSE Nifty is trading lower 11 points (down 0.13%). The BSE Small Cap and BSE Mid Cap indices are trading higher by 0.4% and 0.16% respectively.
( Reported by Equitymaster)
( Reported by Equitymaster)