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Below on CPI & IIP Data by Mr. Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services Group

* Headline inflation came in at 6.8% YoY in Aug'23, lower than the market (and our) forecast of 7.1%. Core inflation came in at 41-month low of 4.8% YoY vs 5% in Jul'23.

* Details of 299 sub-components confirm that only 53.7% of the basket posted +5% YoY inflation, the lowest in 18 months and vs. 61.2% in Jan'23.

* Inflation in core services was unchanged at 3.9% YoY, lowest since Nov'19.

We believe that headline inflation could ease towards 5.7% YoY in Sep'23 and ease towards 5% in 2HFY24. It means inflation of 5.4% YoY in FY24, higher than our previous forecast of ~4.5%. Thus, we expect RBI to keep interest rates unchanged in the foreseeable future.

* IIP, on the other hand, grew 5.7% YoY in Jul'23, better than the market expectation of 5.3% (lower than our forecast of 8.2%).

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