Ahead of WPI data announcement, Sensex and Nifty touch all-time high

The Central Statistics Office (CSO) will be presenting India's Wholesale Price Index (WPI) inflation numbers for the month of December 2017 today.
 
Ahead of WPI data, both Sensex and Nifty touched an all-time high on Monday. At around 0957 hours, Sensex was trading at 34,835.79 up 243.40 points or 0.70%, while Nifty 50 surged 59.25 points or 0.55%, trading at 10,740.50.
 
Both Sensex and Nifty clocked an all-time high of 34829.48 and 10,744.50 respectively.
 
It may be noted that WPI inflation touched an eight-month high at 3.93% earlier in November, up from 3.59% in October 2017, and 3.14% in September 2017.
 

source: tradingeconomics.com  
Uptick in WPI numbers last month was led by primary food items and core inflation, as well as a lagged correction in crude oil and minerals.
 
The spike in vegetable prices led by onions and tomatoes was the chief factor that pushed up the primary food inflation to the 16-month-high 6.1% in November 2017.
 
At the same, rising commodity prices resulted in an uptick in inflation for minerals, crude petroleum as well as some sub-sectors of non -food manufactured products in November 2017.
 
As the WPI for December 2017 will be announced today, here's what analysts are expecting.
 
Sujan Hajra and Pooja Banthia, analysts at Anand Rathi, said, "After remaining in deflation for eleven successive months between Aug’16 and Jun’17, vegetables are experiencing high inflation. Clearly part of the hardening of inflation is induced by low base. Untimely rain and flooding across various parts of India in recent months also seem to have pushed up these prices."
 
The duo further said, “Despite the likely seasonal softening of prices, this inflation is likely to remain high till the first quarter of FY19. While successive hardening of core inflation in the last five months can be seen as a cause for concern, this too is largely unfavourable base induced.”
 
Vegetables contributed 19% of the overall inflation and tomato alone (with 270% inflation) over half of this fiscal.
 
Aditi Nayar, Principal Economists at ICRA, said, “As anticipated, a sharp wedge has reopened between the CPI and the WPI inflation following the considerable hardening in the former in the month of November 2017.”
 
Last week, the CSO released CPI numbers for December 2017, and as expected it rose to 5.21% - higher from 4.88% in November 2017 and 3.41% in the similar month of previous year.
 
Nayar, who expects WPI to rise in December, said, “Core inflation is expected to remain sticky above 3.0% in the remainder of FY2018. Elevated crude oil prices are likely to impart some firmness to the WPI inflation in the ongoing month.”
 
Nayar expects that the WPI inflation to rise further to above 4.0% in December 2017, before easing to a range of 3.2% to 3.5% in Q4 FY2018, benefiting from the base effect.
 
Analysts at Anand Rathi, however, said, "Core inflation is likely to start softening from Jan’18. The transmission of the recent cuts in GST rates on a large number of daily-use items should also have softening effect on WPI inflation. We expect the average WPI inflation for FY18 to remain around 3%.”