Monthly Update

WPI- February ‘10

• The WPI for the month of February stood at 9.89% against 3.50% in the corresponding month of the last year.
The same figure posted 8.56% in the previous month. The figure released is roughly on expected lines which was
pegged at around 9.62%
• The figure came within touching distance of double-digits in this month and was the highest since October’08.
The roaring inflation was driven mainly by firm food prices. There could also be some demand side pressures
reflected in inflation for manufacturing
• BSE-30 was barely moved by the data and was trading down 0.4% and also the partially convertible rupee was
almost unchanged at 45.57 from beforehand. However, the 10-year bond yield edged up 1 basis point to 8.02%,
matching a 17-month high touched last week
• Despite the strong inflation and industrial output numbers, it is expected that the RBI will wait with any action
for its policy review next month. There could be a hike in the cash reserve ratio for banks after its 75 basis point
increase in January
Inflation Internals
• The sub-group of primary articles rose by 15.54% y-o-y against 6.85% in Feb’09. It showed a substantial
increase due to increase in the prices of food-articles by 17.79% on a yoy basis but it declined by 0.1% on a mom
basis due to lower prices of fruits & vegetables, barley, ragi and maize. However, prices of commodities like
pulses, jowar, wheat, moong, barley, milk coffee and poultry chicken increased by manifold
• In the same sub-group, the non-food articles increased by 0.08% m-o-m due to higher prices of oil-seeds (like
sunflower, niger) coir fibre mesta, raw jute and fodder. The index for minerals rose by 0.8% m-o-m which was
due to higher prices of barites, mangnesite, iron-ore, asbestos and felspar
• The second sub-group of fuel, power, lights and lubricants increased by 10.19% y-o-y from -3.40% in Feb'09. It
registered a growth of 1.54% m-o-m due to higher prices of naptha, furnace oil, coking-coal, non-coking coal
and light diesel oil
• The third sub-group of manufactured products registered an increase of 7.42% y-o-y from 4.78% in Feb'09. It
registered a growth of 0.6% m-o-m mainly because of huge increase in the prices of food-products and sugar.
Prices of commodities like man-made textiles, chemical and chemical products, rubber and plastic products
moved upwards while commodities like beverages and related products, wood and wood products, paper and
paper products showed a downward trend
• Food products rose by 1.01% m-o-m riding on increased prices of edible food products. Sugar rose by 4.70%
while there was an increase of -1.44% (mom) in edible oils due to higher prices of oil-seeds. Cotton-textiles
surged by 1.51% (mom) due to increase in the yarn and fibre prices. Basic metals and alloys products and rubber
and related products rose by respectively 0.77% and 3.06% (mom) respectively. Prices of cement also increased
by 2.12% on a mom basis.
Kredent Analysis:

The WPI for December 2009 revised upwards to 8.1% from a provisional rise of 7.31%. It could be that the WPI for
Feb may also be revised upwards in the month of April and the government is just choosing to keep it below the
10% mark for the sake of comfort of capital markets.
At its January policy review, the Reserve Bank had raised its WPI inflation projection for end-March 2010 to 8.5%
and it is already much above that in the month of February. Thus, we believe that it would in all probability lead to a
hike in the key rates by RBI of a minimum 50bps in the April policy review of its monetary policy. Hence, one
should avoid an exposure in the rate sensitive sectors
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Monthly Update
Exhibit: WPI And Its Constituents
Commodities/Major Groups/Groups/Sub- Index M-O-M (% change) Y-O-Y (% change)
Weight
Groups Feb'10 2008-09 2009-10 2008-09 2009-10
All Commodities 100.00 250.1 -0.57 0.64 3.50 9.89
Primary Articles 22.03 284.7 -0.88 0.00 6.85 15.54
Food Articles 15.40 286.1 -0.41 -0.10 9.37 17.79
Cereals 4.41 273.3 2.30 0.48 12.66 11.69
Rice 2.45 252.5 2.35 0.08 17.12 9.54
Wheat 1.38 283.2 1.31 1.22 6.10 14.75
Pulses 0.60 368.9 3.22 -3.91 16.88 35.58
Vegetables 1.46 224.6 -10.21 -6.77 6.55 16.07
Potatoes 0.26 230.9 0.62 -14.95 -17.77 29.65
Onions 0.09 336.8 -5.19 -3.55 90.16 10.35
Fruits 1.46 321.4 -2.56 2.29 11.62 11.13
Milk 4.37 268.7 0.21 0.86 7.33 14.73
Non-Food Articles 6.14 256.5 -2.37 0.08 2.17 13.35
Fibers 1.52 231.4 -4.27 -0.56 9.44 13.38
Oil Seeds 2.67 268.8 -2.65 1.01 0.00 14.19
Minerals 0.48 596.3 0.53 0.79 -0.13 -2.60
Fuel, Power, Light & Lubricants 14.23 356.9 -1.49 1.54 -3.40 10.19
Liquefied Petroleum Gas 1.84 354.0 -6.13 0.06 5.26 0.45
Petrol 0.89 250.5 -9.08 1.54 -8.97 11.73
High Speed Diesel Oil 2.02 491.0 -5.25 1.99 -1.27 8.85
Manufactured Products 63.75 214.3 -0.20 0.61 4.78 7.42
Food Products 11.54 260.0 2.81 1.01 9.26 20.43
Sugar 3.62 278.6 7.05 4.70 24.10 55.47
Edible Oils 2.76 177.5 -1.92 -1.44 -4.34 -0.67
Beverages, Tobacco & Tobacco Product 1.34 312.3 1.07 0.42 10.08 3.58
Cotton Textiles 4.22 195.4 -0.06 1.51 14.94 12.88
Man Made Textiles 4.72 98.9 -1.53 0.30 -0.31 2.70
Wood & Wood Products 0.17 237.6 -2.15 0.00 7.69 2.19
Paper & Paper Products 2.04 204.2 -0.58 0.00 4.56 0.00
Leather & Leather Products 1.02 164.4 -1.24 -0.84 1.82 -1.79
Rubber & Plastic Products 2.39 174.9 0.00 3.06 2.32 4.48
Chemicals & Chemical Products 11.93 231.1 0.42 0.26 2.58 7.84
Non-Metallic Mineral Products 2.52 214.9 0.65 1.37 2.36 -1.01
Cement 1.73 211.9 0.99 2.12 1.22 -5.23
Basic Metals Alloys & Metal Products 8.34 261.7 -4.35 0.77 2.16 2.63
Iron & Steel 3.64 294.8 -5.44 0.65 1.74 2.86
Machinery & Machine Tools 8.36 172.8 0.00 -0.58 2.68 0.35
Transport Equipment & Parts 4.29 175.8 0.06 0.00 2.69 0.11
Source: CSO

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Monthly Update

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