>India: Policy action likely as WPI nears 5% in November (NOMURA)

■ India’s WPI inflation rose more than expected by 4.78% y-o-y in November from 1.34% in October (Consensus 4.20%), led by higher manufactured product prices. We believe that core inflation is starting to rise.

■ Rising global commodity prices are pushing up input cost pressures, beyond just food prices. With demand is picking up as well, we expect firms to have a greater ability to pass-through higher costs.

■ We expect WPI inflation to rise to 8.0% y-o-y by March. We expect the policy rate hiking cycle to start in January and we have pencilled in an inter-meeting cash reserve ratio (CRR) hike before that.

India's wholesale price index (WPI) inflation rose much higher than expected, to to 4.78% y-o-y in November from 1.34% in October (Consensus: 4.20%; Nomura: 4.44%). With weekily data on primary and fuel articles already. released, the surprise largely came from the manufactured products index (weighted at 63.75%). which rose a whopping 1.25% m-o-m in November as compared to an average of 0.5% in 2009 (Jan-Oct).

To read the full report: WPI