Mumbai, Aug. 14 Surprising marketmen on Thursday was the higher-than-expected inflation figure. Thanks to the high fruit and crude price, inflation sky-rocketed to 12.44 per cent for the week ended August 2 from 12.01 per cent in the previous week. A Ministry of Finance statement said that “after being nearly stable for four weeks, this rise has come has a major disappointment.” Marketmen too echoed this thought.
“The figure came as a surprise, as it was much higher than what we were expecting. We were expecting it to be around 12.3 per cent. It won’t be surprising if the central bank will take further measures to reduce the excess liquidity,” said Mr Hitesh Agarwal, Head of Research, Angel Broking.
Fruit prices surged almost 9 per cent, light diesel oil climbed 16 per cent and aviation turbine fuel by 3 per cent. The prices of pulses dropped 1.4 per cent and vegetables by 3.7 per cent.
Playing safeInvestors could have been anticipating high inflation figures, said analysts, which could be one of the reasons why the markets ended the day in the red. “There was definitely some amount of nervousness in the market today, especially during the last few hours of trade. There could have been people who knew the figure before hand and or some of them might be playing it safe before the long weekend ahead,” said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Market.
Mr Agarwal said that interest-sensitive sectors such as banking and realty witnessed the most selling today. The BSE Realty was down close to 8 per cent and the BSE Bankex 5 per cent.
Those who thought that the inflation would touch 13 per cent in a few months, now feel that this could happen in a few weeks time. Inflation could reach as high as 13 per cent in less than a month, as already we are at 12.44 per cent and 13 per cent is not very far away,” said Mr V.K. Sharma, Whole Time Director and Head of Research at Anagram Stock Broking.
Looking aheadMr Prashant Bhansali, Director, Mehta Equities, said that once inflation reaches 13 per cent, we could see it stabilise and gradually decline. A recent report by Enam Securities stated that inflation could see a peak of around 13 per cent before easing.
As for what one can expect on Monday, marketmen said that we have to see how the global markets behave in the next two days, as well as the direction of the crude prices.
“We should look at how the US markets perform in the next two days and the price of crude. There is likely to be a knee-jerk reaction on Monday,” said Mr Agarwal. “If we assume that all things remain normal and take into consideration the high inflation figure, the markets will definitely react negatively to this,” said a head of research at a domestic brokerage.
