CPI inflation may have peaked, says Motilal Oswal Financial Services

Headline retail price inflation based on the consumer price index may have peaked, Motilal Oswal Financial Services said. According to MOFSL research, the cutting edge trend could bring some relief to market players, especially in the bond segment.

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“We expect the IIP to remain broadly unchanged year over year as of June 21, before reporting marginal growth of 1-2% yoy between July and August 21.” “Overall, we do not see an increase in RBI rates during FY22.”

Recently, CPI-based retail price inflation remained unchanged at 6.3% year-on-year in June 2021.

“The number was slightly above our expectations of 6.1%, but below the Bloomberg consensus of 6.6% year-on-year as of June 21. More importantly, the price data for June 21 was collected from 80 % of markets, up from 68 percent on May 21, implying better reporting as foreclosure rules eased in several states last month. ”

Food inflation stood at 5.2% yoy in June 2021 compared to 5% inflation in May, inflation for fuels and light vehicles reached 12.7% yoy and clothing inflation. and shoes at 6.2% yoy.

“On the other hand, sundries inflation was flat at 7.3% year-on-year as of June 21.”

“Within miscellaneous, education and household goods and services were the only subcomponents to report higher year-on-year inflation as of June 21.”

In addition, MOFSL expects the IIP to remain broadly unchanged in terms of year-to-year in June 2021, before reporting marginal growth of 1-2% year-on-year from July to August 2021.

“Overall, we expect real GDP growth of 20% year-on-year in 1QFY22.”

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