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Below the Quote on Perspective on CPI & IIP Data by Mr. Nikhil Gupta, Chief Economist, MOFSL Group

*  Headline inflation was 5.1% YoY in Jun'24, higher than the market consensus (and our forecast) of 4.8% and 4.8% each in the past three months. Details, however, are also not really concerning:

*  Vegetables drove higher inflation. CPI-inflation ex veg (weight = 94%) dropped further to 3.2% last month (vs 3.5% in May)

*   Core CPI (ex F&B and F&L) was unchanged at 3.0% YoY

*   Standard core inflation (ex food & energy, weight = 52%) dropped sharply to new low of 2.7% YoY last month from 3.3% in May

*   Services (weight = 23%)  inflation was unchanged at 2.7% YoY, with inflation in core services (weight = 13%) falling to new low of 2.7% last month

*  Details of 299 sub-components suggest that the weight of CPI-basket with <=5% inflation increased to 7-year high of 74% in Jun'24, from 73% each in the last two months.

Separately, IIP grew 5.9% YoY in May'24, better than the market consensus of 4.9%, but in line with our forecast of 6%. It was 5% in Apr'24.

Overall, slightly higher headline inflation, led by vegetables, and better IIP growth together push the rate cut hopes by the RBI further down.

However, an easing of inflation to <4% in 2QFY25 and a cut by the US Federal Reserve in as early as July-end, may fuel the market expectations in India as well. We don't see the RBI cutting rates in CY24.

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