Macro

Credit Continues To Expand

The folks at cycle.in continue providing seasonally adjusted data, and noteworthy this time is Non-Food Credit and Bank credit to the commercial sector:

SAAR, Non-Food Credit SAAR, Bank Credit to Commercial Sector

(L-R Non-food credit, Bank credit to commercial sector. Click for larger images)

PA Inflation at 17.26%, up from last week

For the week ended 15 Jan 2011, Inflation picked up a little, with primary articles going to 17.26%. This is marginally higher than last week's 17.03%.

Primary Articles Inflation

And as usual, the past revisions continue.

RBI Ups Rates by 0.25%

The Reserve Bank has increased interest rates by 25 basis points (0.25%) in its review meeting of Jan 2011. The monetary policy document says a lot about RBI's concerns.

Primary Articles Inflation at 17.03%

For the week ended 8 Jan 2011, Primary Articles inflation ended at 17.03%, coming of the 20% highs we saw recently.

Primary Articles Inflation Chart

Buy the Rumour...

Jayant Pai at PPFAS talks about how markets react wildly to news:

A friend of mine who is a newly converted equity investor was rather perplexed with regard to two developments recently. The Infosys stock fell 5% on the day despite announcing a Year-On-Year (Y-o-Y) net profit growth of 14% (a very decent number, considering its huge size) while the Nifty rose by nearly 2% on a day when the Index of Industrial Production (IIP) data for November 2010 showed a Y-o-Y growth of merely 2.7%. According to him, the opposite should have happened in both the cases. Although short term market moves may happen for apparently no particular reason, one explanation for this may be that it things were already “priced in”. This is jargon for saying that the stock/index had already moved in a particular manner PRIOR to the news.

For good news, you would always "Buy the Rumour and Sell the News". Infy's stock has seen a meteoric rise in the last six months, compared even to the rest of the pack.

December Inflation at 8.43%, Sounds Too Low

The latest release says the December 2010 overall inflation is at 8.43%. Interestingly, manufactured goods saw only a 4.46% inflation, but Fuel saw 11.19% and Primary Articles saw 16.46%.

December Inflation at 8.43%

At Yahoo: Market Interventions

I write at Yahoo on Market Interventions:

(Posted in entirety)

There were riots in Bangladesh on Monday when markets went down 9% in an hour. Stocks fell, presumably because their central bank decided to tighten down on bank exposure to equity, and the general index has been slowly sliding from December. It may sound unreasonable to have such an event create a loss of 9% in a single day — or indeed the 27% loss in a month that Dhaka saw — but it comes on the back of a 2010 that saw the index rise 95 percent. Now that fall doesn't seem quite as bad, does it?

Shaken by the public furore, Bangladesh's central bank instructed banks to please buy stocks — and as expected, their index rebounded by 15% on Tuesday. The idea is to never mess with a good thing, I guess.

Intervention doesn't always work. In 2008, Pakistan's stock markets fell about 43% and to somehow stop that, the authorities decided to set a floor price on the index; meaning, stocks couldn't go below a certain value. What happened then, was that the floor became a ceiling — stocks would simply not trade above that level. When the floor was removed in December 2008, stocks fell another 35% before they rebounded.

Primary Articles Inflation at 17.58%

The first data of 2011 is out – Data for Jan 1, 2011 shows Primary Articles at 17.58%.

Primary Articles Inflation Chart

As usual, the revisions of past data are huge.

November 2010 IIP comes in at 2.7% Growth

I don’t trust the (first estimate of) Index of Industrial Production that is released monthly by MOSPI, because it is subject to so many revisions that everything gets invalidated later. Today, they’ve released the index for November and it is at 317.9, a level that points to just 2.7% growth over November 2009.

IIP at 2.7% in November 2010