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Inflation moves from food to fuel
Fri, 12 Mar 01:30 pm

Indian markets continued their downward trend in the last two hours of trade led by stocks in the realty, consumer durable and consumer goods space. However, stocks in the metal, oil & gas and auto sector continue to find favour among investors.

BSE-Sensex is trading lower by 13 points while NSE-Nifty is trading flat. BSE-Midcap Index is down by 8 points while the BSE-Smallcap index is trading 3 points above yesterday’s closing. The rupee is trading at 45.49 to the US dollar.

According to a news article, Bharti Airtel, has announced the launch of digital media exchange for integrated content delivery across multiple cinema screens, television and mobile handsets across various geographical areas. Moreover the company would cater to animators, gaming firms, media producers and banking institutions. With the 3G (third generation) telecom service expected to be launched soon in India, the company is positioning itself to leverage its presence in 3G space. While Bharti has not indicated its revenue expectation, this move is seen as the next step in telecom. With the competition getting more intense in the telecom sector this move by Bharti is seen as an effort to diversify its revenue stream.

Food inflation for the week ending 27th February came in a tad lower at 17.81% compared to 17.87% registered for the previous week. While the essential commodities continue to be expensive the rate of price increase has been falling for some time now. The declining trend would buttress the government’s claim that the prices would fall from April onwards. However, fuel inflation is spreading to other areas. RBI is of the opinion that overall inflation would hit double digits by end of March 2010 due to increase in prices of fuel.

Inflation is now broad based and spreading to other areas including manufacturing. Budgetary increases in excise duty and customs duty has led to a 6% increase in price of fuel on a weekly basis while on a yearly basis petrol prices have increased by 16.8%. While the leveling out of food prices is a positive for consumers as well as for food companies like Britannia and Nestle, rise in fuel costs is expected to spurt inflation, making a case for the RBI to tighten monetary policy.

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