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Inflation falls to 30 year low - Views on News from Equitymaster
 
 
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  • Jun 19, 2009

    Inflation falls to 30 year low

    WPI based inflation has fallen into the negative territory for the first time in 30 years. For the week ended June 6, the number stood at -1.61%. Negative inflation (deflation) is considered worrisome if it is caused by a slowdown in economic demand. However, in India's case, the deflation is on the back of a high base effect of high crude prices last year. It may be noted that inflation is measured on a YoY basis. Economy watchers believe that the current deflation is a temporary phenomenon and the number will be back in the positive territory in the next few months. In fact, inflation in the prices of food items like cereals and pulses continue to be high: 13.6% and 16.8%, respectively. Hence, 'deflation' still brings no respite to the common man.

    Tata to take luxury cars into small towns
    As per a leading business daily, Tata Motors plans to launch the Jaguar and Land Rover brands in India on June 28. Interestingly, it plans to set up exclusive showrooms in the smaller towns as well. The company will bring the entire range of models to India, although tweaked for Indian conditions. They will be priced in the range of Rs 3.5 m to Rs 9 m. For now, the company is aiming at establishing its presence in India and not looking at huge volumes. In fact, its targets are more in the range of 100s and not in 1,000s. It is interesting to note that luxury car brands are not necessarily great businesses from the investors' viewpoint. It takes a great deal of time, effort and money to maintain the brand image and the space is highly competitive. However, most luxury car brands now want a piece of the action in India. In this light, it would be interesting to watch how Jaguar and Land Rover fare in the days ahead.

    SEBI introduces 'anchor investor'.
    As per a leading business daily, market regulator SEBI has introduced the concept of 'anchor investor'. It will be useful for companies who want to raise money from the primary markets but are scared of the recent volatility. As per the SEBI proposal, the anchor investor would be a qualified institutional buyer (QIB) and an issuer can allot up to 30% of its institutional portion. The anchor investor will make a prior commitment and if subsequently the IPO price is higher, the anchor investor would have to match the price. This move is likely to bring in greater certainty to the capital raising process and will facilitate better price discovery.

     

     

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