Annualized inflation in India is now running at a rate of 9.44%, somewhat less than the 9.68% that economists were expecting but still a ominous increase from the 9.06% reported in May.
Finance Minister Pranab Mukherjee blamed the acceleration in prices on the high cost of oil, which has forced Indian refining companies to sell consumer fuels at a loss.
Now that Delhi has lifted its price caps on diesel, kerosene and other fuels, the pressure is off the refiners, but back on consumers — and that means inflation has yet to peak in one of the world’s most inflation-wary countries.
Barely a few weeks ago, Mukherjee won trader applause by announcing that he can live with inflation at 6% to 6.5%.
However, if 9% inflation continues, the country’s real interest rates and GDP growth are effectively negative, which is not a situation that inspires confidence.
At least one more interest rate hike is almost assured. Look for a statement from the Reserve Bank of India on July 26 to confirm this.
In the meantime, Mumbai has had a good run, but unless the macro news improves, it will take some bullish technical factors indeed to push the major Indian ETFs up and out of their recent range.
Take a look at iPath MSCI India Index ETN (NYSE:INP) to pick your entry and exit points:
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.