New Delhi:

Wholesale inflation fell for the second consecutive month to 1.31 per cent in August due to cheaper vegetables, food and fuel, government data released on Tuesday showed.

The wholesale price index (WPI) based inflation was 2.04 per cent in July. It was (-) 0.46 per cent in August last year.

“Positive rate of inflation in August 2024 is primarily due to increase in prices of food articles, processed food products, other manufacturing, manufacture of textiles and manufacture of machinery & equipment etc,” the industry ministry said in a statement.

As per the data, inflation in food items was 3.11 per cent in August against 3.45 per cent in July. This was led by declining prices of vegetables, which recorded a deflation of 10.01 per cent in August compared to 8.93 per cent in July.

Inflation in potatoes and onions continued to be high at 77.96 per cent and 65.75 per cent in August.

The fuel and power category witnessed deflation of 0.67 per cent in August against inflation of 1.72 per cent in July.

Data released last week showed retail inflation was at 3.65 per cent in August on higher prices of vegetables. This was higher than 3.60 per cent in July.

The Reserve Bank of India (RBI), which mainly takes into account retail inflation while framing monetary policy, kept the benchmark interest rate or repo rate unchanged for the ninth consecutive time in August at 6.5 per cent. 

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Benchmark equity indices tumbled in early trade on October 9 as escalating tensions in Middle East triggered a risk-off in the market.

Market analysts said investors preferred to remain on the sidelines and refrained from taking big risks as the Israel-Hamas conflict has introduced a huge uncertainty for the markets The 30-share BSE Sensex plunged 407.19 points or 0.62% to 65,588.44 points in early trade. The Nifty declined 142.70 points or 0.72% to 19,510.80 points.

State Bank of India, Tata Steel, Titan, IndusInd Bank and Asian Paints were among the major laggards. On the other hand IT majors HCL Technologies, Tech Mahindra, TCS, Wipro and Infosys, Hindustan Unilever and Sun Pharma defied the broader market trend and were trading in the positive territory.

The BSE benchmark had climbed 364.06 points or 0.55% to settle at 65,995.63 points on Friday. The Nifty had advanced 107.75 points or 0.55% to end at 19,653.50.

“The Israel-Hamas conflict has introduced a huge uncertainty for the markets. Nobody knows how this war is going to evolve,” V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

He said that even though it is unlikely to cause major disruption in oil supplies at present, the situation will change if Iran, a major Hamas supporter, is drawn into the war. “That can disrupt oil supplies causing a spike in crude, which can trigger a risk-off in the market. This is a time to be cautious,” he added.

Traders are also expected to remain cautious ahead of macroeconomic data to be announced later this week. The industrial production and manufacturing data for August are scheduled to be announced on October 12. Simultaneously, inflation rate for September will be announced followed by Wholesale Price Index (WPI) data on October 13.

On Friday, the Reserve Bank of India expectedly left its key interest rate unchanged and signalled it would keep liquidity tight using bond sales to bring prices closer to target.

The six-member monetary policy committee of RBI held the benchmark repurchase rate (repo) at 6.50% in a unanimous decision for the fourth consecutive meeting in a row. It also retained a ‘withdrawal of accommodation’ stance. Asian markets are trading lower on Monday as Chinese and Hong Kong shares fell.

European markets finished broadly higher on Friday with Germany’s DAX gaining 1.06%. France’s CAC 40 was up 0.88% and London’s FTSE 100 closed 0.58% higher.

The U.S. markets ended higher on Friday with S&P 500 closing with a gain of 1.18% and Dow Jones Industrial Average Index up 0.87%.

Meanwhile, global oil benchmark Brent crude witnessed a sharp rise of 3.68% to $87.69 a barrel on Monday. Foreign Institutional Investors (FIIs) offloaded equities worth ₹90.29 crore on Friday, according to exchange data.

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The wholesale price based inflation remained in the negative territory for the fourth straight month in July at (-)1.36% on easing prices of fuel, even though food articles turned costlier.

The wholesale price index (WPI) based inflation rate has been in the negative since April and was (-)4.12% in June. In July last year it was 14.07%.

Inflation in food articles skyrocketed 14.2% in July against 1.32% in June.

“Decline in the rate of inflation in July, 2023 is primarily contributed by fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products,” the commerce and industry ministry said on August 14.

Fuel and power basket inflation eased to (-)12.79% in July from (-)12.63% in June.

In manufactured products, the inflation rate was (-)2.51% as against (-)2.71% in June.

The RBI last week kept interest rates unchanged at 6.5% for the third straight meeting but signalled tighter policy if food prices drive inflation higher.

“The job on inflation is still not done,” RBI Governor Shaktikanta Das had said.

“Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties.”

The RBI raised its inflation forecast for the current financial year ending March 2024 to 5.4% from 5.1% earlier, citing pressures from food prices.

The Central bank takes into account retail or consumer price index based inflation for formulating monetary policy. Retail inflation data for July is scheduled to be released later in the day.