India Stocks in 2-day Rally; Elevated Inflation

Chandrasekhar Atreya
30 Dec, 2010
New York City

Stocks in Mumbai rallied tracking gains in Asia. Investors are looking for a sustained economic expansion in 2011 as commodities hover near highs for the year. Sensex in the year is up 15%. Food and fuel prices surge in the latest read on inflation.

[R]4:00 PM Mumbai – Stocks in Mumbai rallied tracking gains in Asia. Investors are looking for a sustained economic expansion in 2011 as commodities hover near highs for the year. Sensex in the year is up 15%. Food and fuel prices surge in the latest read on inflation.[/R]

The Sensex index increased 133.04 or 0.7% to close at 20,379.23 and Nifty 50 index added 41.15 or 0.7% to close at 6,101.85. For the year the indexes are up 16%.

The rupee closed at 44.92 to a dollar in Mumbai trading today.

Food price index rose 14.44% while the fuel price index climbed 11.63% in the year to December 18 from the previous week when these indexes rose 12.13% and 10.74% respectively, government data showed today.

The wholesale price index, the most widely watch gauge of prices in India, rose 7.48% in November from a year earlier compared with 8.58% in October.

The Ministry of Industry set up an internal committee to prepare a framework for the new index. The committee has commissioned studies to arrive at a commodity basket for the PPI.

Finance Minister is likely to introduce in the forthcoming budget some major changes in direct tax laws that could help in the swift recovery of tax arrears, which have grown to about Rs 250,000 crore.

The changes proposed include reducing the limits to approach Income Tax Settlement Commission allowing those who have faced IT raids to approach the commission even if the demand raised against them is not hefty.

The silver soared 65% in rupees whereas gold rose 25% and the Sensex gained just above 15% in 2010.

India is on course to become the world’s most populous country in 2025, topping China, the U.S Census Bureau forecast, potentially changing the dynamics between the Asian giants.

The latest Census bureau estimates out this week, in line with previous studies, forecast that India’s population would be 1.396 billion in 2025, surpassing China, with more modest population growth.

India may face fuel supply shortages next month after Reserve Bank of India stopped facilitating payments for Iranian crude oil imports, which make up 12% of the nation’s oil needs.

The RBI’s sudden move, which came without either the oil industry or the government consultation, may force the cancellation of 10 million barrels of crude contracted from Iran for January. The oil supplies are easy to replace in a short period of time.

The RBI has sought the payment for oil outside the international clearing system to eliminate the transfer cost.