InvestorQ : Do you see lower inflation as positive for markets and what triggered it lower?
Arti Chavan made post

Do you see lower inflation as positive for markets and what triggered it lower?

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Rutuja Nigam answered.
4 months ago
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Let us first look at how inflation panned out in the month of July. Retail inflation fell to a 3-month low of 5.59 compared to 6.26% in the month of Jun-21. The big trigger for lower headline inflation was the sharp fall from 5.15% to 3.96% in food inflation. However, fuel inflation remained elevated at above 12% with petrol inflation 23.70% and diesel inflation at 22.71%. Core inflation is lower but not by too much.

In terms of market impact, the market needs to see lower inflation and to that extent this is positive. However, the markets will also look at the impact on RBI policy. However, RBI has already clarified that it would rely more on growth revival than on inflation. Unless inflation becomes a demand problem, RBI is unlikely to act. As of now, inflation still appears to be a supply driven problem.

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