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Of Retail Inflation, Growth in India's Aviation Sector, and Top Cues in Focus Today
Wed, 14 Nov Pre-Open | Monish Vora, TM Team

Share markets in India witnessed buying interest during closing hours yesterday and ended the day on a positive note. Sectoral indices ended on a positive note with stocks in the oil & gas sector and capital goods sector leading the gains.

At the closing bell yesterday, the BSE Sensex stood higher by 331 points (up 1%) and the NSE Nifty closed up by 100 points (up 0.9%). The BSE Mid Cap index ended the day up 0.3%, while the BSE Small Cap index ended the day up by 0.2%.

Top Stocks in Focus Today

From the pharma sector, Lupin share price will be in focus today as the company has launched the Atovaquone Oral Suspension USP, 750 mg/5 mL having received an approval from the United States Food and Drug Administration (FDA) earlier.

To know more about the company, you can access to Lupin's Q1FY19 result analysis and Lupin's 2017-18 Annual Report Analysis.

Cipla share price will also be in focus today as the company announced that its subsidiary InvaGen Pharmaceuticals Inc has entered into definitive agreements to acquire US-based speciality business firm Avenue Therapeutics for up to US$ 215 million.

From the automobiles sector, market [participants will be tracking Tata Motors share price as the company's global wholesales in October 2018, including Jaguar Land Rover, came in at 1,09,597 nos., higher by 6%, as compared to October 2017.

To know more about the company, you can access to Tata Motors Q2FY19 result analysis and Tata Motors' Stock Analysis.

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Industrial Production Slips to 4-Month Low in September

Moving on to the news from the macroeconomic space, India's industrial production grew 4.5% in September compared with the upward revised 4.7% in August.

This is seen as the slowest pace in four months which was seen on the back of poor performance of the mining sector and lower offtake of capital goods.

As per the data, the mining sector output growth decelerated to 0.2% in September as against 7.6% in the year-ago month. Similarly, capital goods output growth slowed to 5.8% in the month from 8.7% a year ago.

As per the use-based classification, the growth rates in September 2018 over September 2017 are 2.6% in primary goods, 1.4% in intermediate goods and 9.5% in infrastructure goods. The consumer durables and consumer non-durables recorded growth of 5.2% and 6.1%, respectively.

The IIP was recorded at 6.9% and 6.5% in June and July this year, respectively. The previous low was recorded at 3.8% in May this year.

For the first six months of the year, factory output as measured by the index of industrial production (IIP) grew 5.1% compared with 2.6% in the year-earlier period.

Retail Inflation Eases to 3.31% in October

India's retail inflation rate dropped sharply in October but plunging farm prices sent a stark warning to Prime Minister Narendra Modi about the challenges he faces in rural areas in next year's general election.

The rate, which includes food and energy prices, dropped in October to 3.31% on a year-on-year basis, the slowest pace in 13 months and remains below the Reserve Bank of India's (RBI) medium-term target of 4% for a third straight month. The September inflation rate was a revised 3.7%.

Inflation risks have ebbed after a fall in global crude oil prices by about 20% since early October to around US$71 a barrel. The rupee has also stabilised after a slide of more than 14% in the first 10 months of this year, which has made it the worst performing Asian currency in 2018.

The RBI's monetary policy committee unexpectedly left the repo rate at 6.5% last month when markets had expected a hike.

Slower inflation in food prices, which make up nearly half of India's consumer price index (CPI), are helped by bumper crop supplies and sale of subsidised food grain to nearly two-thirds of India's population of 1.3 billion. That has, in turn, helped keep overall inflation in check.

Retail food prices fell 0.9% in October from a year earlier, against a 0.5% rise in September, as farm prices dropped despite the government's announcement of sharp increase in food grain procurement prices ahead of state elections in the next few weeks.

Aviation Sector Witnesses 49th Consecutive Month of Double-Digit Growth

In the news from the aviation sector, as per the International Air Transport Association (IATA), Indian airlines achieved their 49th consecutive month of double-digit traffic growth. The growth came on the back of a rise in demand to 19.8% in September.

According to the data, India's domestic air passenger volume measured in revenue passenger kilometers (RPK) was highest among major aviation markets like Australia, Brazil, China, Japan, Russia and the US.

It also mentioned that India's domestic passenger traffic growth was followed by that of the Russian Federation at 11.1% and China at 9.3%.

In terms of capacity, IATA stated that India's domestic available seat kilometres (ASK), which measures available passenger capacity, was higher by 18.8% in September, that of China's 10.3% and the US saw a 8.6% rise.

Speaking of airline sector, India's aviation industry is on a high-growth trajectory. India's domestic air traffic has seen a prolific growth of 20-25% during 2015 and 2016. And in 2017, it tapered to 17.4%. However, for the first time, domestic air traffic crossed an important landmark of 100 million passengers during the previous year.

What's foreseeable for India's aviation traffic now is some pressure on the back of the consistent rise in crude oil prices.

Oil prices are closely monitored by the Indian air carriers, as aviation turbine fuel is their single largest input cost. A sharp rise in the cost of fuel puts pressure on margins, and consequently an increase in air fares.

Although air travel is becoming the new normal, investors need to understand the industry dynamics before buying up aviation stocks.

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