>INFLATION (INDIA CAPITAL MARKETS)

WPI continues to be negative - increases on a weekly basis

• The WPI continues to be negative at -1.17% for the week ended July 11, 2009 as compared to -1.21% for the week ended July 04, 2009 (consensus was at -1.17%).

• Though this is the sixth successive week of negative inflation (yearly), it continues to increase on weekly basis. This week it has increased by 13 bps.

• The rise in inflation largely owes to increase in price index of Primary Group by 70 bps on a weekly basis. The rise was led by increase in Food Articles (by 91 bps) followed by Non-food Articles (by 29 bps). The Mineral Group again remains unchanged for the week.

• The Fuel Group price index was up by 6 bps led by increase in price index of Mineral Group by 10 bps.

• The Manufacturing Group price index was infact down by 10 bps. This was attributed to decrease in price indices of Food Products (by 43 bps) and Chemical Products (by 4 bps). The group price indices that rose on a weekly basis include - Rubber & Plastic Products (by 18 bps), Textiles (by 7 bps), Machinery & Tools (by 6 bps) and Basic Metal, Alloys & Products (by 4 bps).

• The prices of Food Articles are expected to be at elevated level till the problem of short supply persists. However, revival of monsoon should be an encouraging factor with Kharif Crop sowing started to peak up.

• The WPI figures for the week ended May 16, 2009 has been revised upwards by 104 bps to 1.65% from 0.61% (twelevth consecutive upward revision and fourth upward revision of 100 bps or more). This was led by upward revisions in price indices of Manufacturing Group (by 129 bps), Primary Group (by 75 bps) and Fuel Group (by 65 bps).

To see full report: INFLATION 230709