Improvement in monsoon positive for markets, inflation: India Ratings

An overall improvement in monsoon this year will augur well for inflation and markets going forward, India Ratings and Research said in its latest report. 

According to a ratings agency report, rainfall in India recorded a surplus of 1% (from an 18% deficit a fortnight ago) for the long-period average between June 1 and July 6, 2016.

" Concerns over a seasonal uptick in food inflation may be abated as overall improvement in the current season’s rainfall has signalled an encouraging market trend,” said India Ratings' analyst Bansi Madhavani in a research note on Monday. 

The Government of India will released the retail and wholesale inflation data later this week.

During the ongoing week, the debt market in the country will witness positive momentum on the back of falling global crude oil prices and expectations of monetary measures by central banks across the world. 

“The debt market is likely to continue its positive momentum, gaining on account of low global yields, softness in crude oil prices and expectations of monetary measures by central banks globally. Additionally, an improvement in liquidity will continue supporting a steepening bond curve,” Madhavani said. 

As far as liquidity adjustments are concerned, the ratings agency said, “Adjustments in domestic liquidity have continued, anchoring the interbank market close to a neutral zone.” 

It added that in future as the outgo on account of indirect taxes drains the system, the Reserve Bank of India (RBI) will handle these frictional mismatches through its repo operations. 

India Ratings remained positive on the value of rupee in the ongoing week.

“Evolving shifts in the global risk appetite will continue being a dominant factor for investors’ focus, determining the rupee trajectory through the week,” cited Madhavani in a note.