Expert Zone

Straight from the Specialists

The RBI and its inflation dilemma

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(Arvind Chari is a senior fund manager of Quantum Asset Management Company Private Limited. The views expressed in this column are his own and do not represent those of either Quantum AMC or Reuters.)

The wholesale price index number for September (7.81 percent) poses a dilemma for the Reserve Bank of India (RBI). With the finance ministry leaving no opportunity to make its case for lower interest rates and exhorting the RBI to take ‘calibrated risks’, the recent inflation data gives no comfort to the RBI to go ahead and confidently cut the repo rate in its October policy review.

The headline WPI number was expected to be higher than the previous month on the back of an increase in diesel and LPG prices. The RBI has factored in the rise in fuel prices in its March inflation target and would overlook the recent increases for the time being as fuel price hikes also go about solving the fiscal deficit problem. Although headline inflation would remain high in the months to come, the RBI would choose to ignore domestic fuel price increases as a policy action needed to correct the fiscal imbalance.

But the central bank would have certainly hoped for lower manufacturing and food inflation. Despite the overall industrial slowdown, manufacturing inflation remains above 6 percent, as against the RBI’s comfort level of around 5 percent. Core inflation, a flawed but popular measure of tracking inflation, has also been consistently above the 5.5 percent mark in the last 3 months. For the RBI to be comfortable with the future inflation trajectory, given the backdrop of volatile food prices in India, manufacturing inflation needs to remain below 5 percent. This is not quite the case today.

Banks as a shop for insurance

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The concept of insurance plans being sold through banks is called ‘bancassurance’ and there is a lot of interest in this distribution channel from all the stakeholders - customers, banks, insurance companies and the regulator.

If the U.S. and EU slide into recession

(The views expressed in this column are the author’s own and do not represent those of Reuters)

There are apprehensions that the U.S. and EU could drift into recession again. The economic crisis of 2008 unnerved every country, with growth either turning negative or falling drastically. The recovery from that recession was weak and any relapse could be prolonged.

India market weekahead: Consolidation seen, earnings in focus

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

October has been touted as a difficult month for stocks, though for the Indian markets there didn’t seem to be anything stopping the repeat show of October 2011 until the flash crash on 5th.

When will India’s reforms show results?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

After a long silence the spell has finally been broken. The second phase of reforms in the country has begun with almost the same conviction as the first but under different conditions. The 1991 reforms were under compulsion but the present reforms are voluntary. This is because the last 20 years have been a test to prove to ourselves that reforms help and they have substantially helped to make the country an emerging market economy.

Temporary market correction an opportunity to buy

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Opposition party protests against the UPA coalition government’s economic reforms could not puncture market sentiment in the past four weeks. One domestic brokerage house dealer’s “fat finger” did it in just a few seconds.

Sharp fall in Nifty: Understanding flash crash, algo trading

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Global markets have witnessed flash crashes in the recent past, the most famous one being on May 6, 2010 when U.S. markets dropped 600 points in a matter of minutes, only to recover later. But the one which we witnessed Friday on the National Stock Exchange resulted in the market being shut for a while.

A gift for Mahatma Gandhi

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(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)

Having replaced the feudal princes by colonising India, the British Civil Service carried on with the master-subject relationship which, understandably, entitled them to huge discretionary powers.

Markets Weekahead: Watch out for Nifty levels of 5,900, mid-cap shares to shine

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The week was expected to be volatile with a possibility of a minor correction but turned out to be one of consolidation. The Nifty closed at 5,703, higher by 12 points, its fourth straight week of gains. Indian markets have been among the best performing ones with gains of 8.46 pct in September. FIIs continued to pour in with last week’s tally at $1.42 billion.

Weighing the Obama-Romney calculus

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Much is at stake in the United States presidential elections this year, perhaps more in terms of policy than in the past few election cycles. The presidency of Barack Obama has been fraught with battles in a deeply divided Congress, leading to paralyses on some major agenda such as government debt, and significant compromises on others such as healthcare reform.

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