Data this week: Covid curbs, inflation concerns

inflation

India’s retail inflation has remained below the Reserve Bank of India’s upper tolerance limit for the past few months. However, with the weakening base effect and rising prices of some food items, inflation based on the CPI could easily reach the 6% mark in December, according to analysts. This will be known when the figures are released on Wednesday.

In December, inflationary pressures were visible in foods such as tomatoes, with prices rising 54% from a year earlier. Food prices were up in November, with the food and beverage index rising to 2.6% from 1.8% the previous month. Moreover, the recent reduction in excise duty on petrol and diesel has not provided any significant relief.

With core inflation already above 6%, a similar headline print could set a rough backdrop for the next meeting of the Monetary Policy Committee in February, even if Omicron versions as a threat to the ongoing growth recovery. Are you emerging

covid update

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Despite travel restrictions and an immediate ramp-up in booster shots, the Omicron version of COVID-19 has spread around the world in just a month. India on Saturday reported nearly 160,000 new cases, down from 10,000 just a fortnight ago. The coming few days will be crucial to limit the infection rate ahead of the elections in five states due next month. The Election Commission is likely to take a decision later this week on banning campaign rallies till January 15. Concerned Indians will also keep an eye on new restrictions by local governments.

Elsewhere, the US, UK and France have seen infections at an all-time high, necessitating a re-lockdown. While the hospitalizations are taking place, the silver lining Omicron version appears to be lighter. Vaccination is the only solution, and India took a big step on that front this month by making older children eligible.

IT Earnings

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Major IT companies – Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies – will begin the third quarter results session this week. The sector has benefited from the boom in digitization and cloud services during the pandemic. Analysts expect a strong third quarter for the IT services leaders despite the year-end holidays. Last year too, seasonality had little impact on performance. This time around, lower furloughs and deals won in previous quarters will drive growth.

ICICI Direct Research reported 11-20% year-on-year growth for HCL Tech, TCS and Infosys and 29% for Wipro. However, the devaluation of the rupee will reduce the dollar’s revenue to some extent. In the case of wage increases, the supply side pressure will restrict bottomline growth in proportion to revenue expansion. But, all four firms may see a gradual improvement in margins, with Wipro reporting lower figures than the other three.

hdfc bank result

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Country’s largest private lender HDFC Bank will release financial results for the quarter ended December on Saturday. Analysts expect growth in all key parameters as the economy did well during the quarter.

Credit growth, which has gained steady momentum, will receive further fuel from the festive pick-up seen in the last quarter, but the third wave of COVID-19 could dampen sentiment going forward.

In a recent update, the bank reported the total advances raised up to 12.6 trillion in the December quarter, a 16.4% increase from the same period a year ago. Retail credit, which was hit hardest by the pandemic, grew nearly 13.5% compared to a year ago and 4.5% on a sequential basis. Commercial and rural credit registered a growth of 29.5%. Analysts at Motilal Oswal cautioned on asset quality and slippages, saying these segments are poised to support overall growth.

US inflation

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Retail inflation in the US hit a 40-year high of 6.8% in November, and remained above 5% for six consecutive months. Price increases were across sectors including food, housing and fuel. Even a modest increase in retail sales at Christmas time reflects a decrease in price for US consumers. The inflation data for December is awaited on Wednesday. The US Federal Reserve for the first time removed “transient” from its FOMC minutes released last week. It acknowledged that inflation remained high and was “more frequent and widespread than previously”. All members of the committee have revised their inflation forecasts for 2022, and many have done the same for 2023.

Given that growth is on track, with strong demand and falling unemployment, the Fed has decided to end its pandemic-era bond purchases in March and is likely to raise three key interest rates by the end of next year. .