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Our Bureau

Mumbai, June 18 The headline inflation falling into the negative territory will not have much of an impact on the stock markets said market men. “Significant high base effect remained the key reason for this drop, even though the index reported 0.04 per cent rise compared with the previous week,” said Mr Soumendra Dash, Chief Economist at CARE Ratings.

The investors here are mature enough to realise that inflation has become negative not because of an economic contraction so this will be treated as a non-event by the market said Mr Jagannadham Thunuguntla, Head Equity at SMC Capitals. “The RBI will not take any monetary measures to contain this sort of inflation.” This is a temporary phenomenon said Mr Dash. “The headline inflation will be back in the positive territory soon. Though inflation is contained and moved into negative territory, the RBI will prefer to adopt wait and watch policy for the time being.”

“The inflation falling into the negative territory is not much of a concern as it has happened due to a high base year effect. The auto sales, cement despatches dipping would mean that the economy is slowing down; the inflation falling to negative will not affect the markets much,” said Mr Mehraboon Irani, V-P, Portfolio Management Services at FCH Centrum Wealth Managers.

While negative WPI readings is likely to persist for the next three months, we expect inflation to edge up to 4 per cent by the year-end, said Citigroup Global Markets in a recent report.

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