Every Monday, Mint’s Plain Facts section features key data releases and events to look for in the coming week. India will release retail inflation data for March on the back of tectonic shifts in the global geopolitical scenario with the Russia-Ukraine war. Tata Consultancy Services (TCS) and Infosys will announce their March-ended quarter results and the European Central Bank is set to take a decision on monetary policy as inflation soars in Europe. Here’s more:
1. India inflation
Data on India’s consumer price index-based inflation for March will be released on Tuesday. Retail inflation rose to 6.07% in February, breaching the Reserve Bank of India’s upper tolerance limit of 6% for the second consecutive month. Relief is not likely soon: upward risks emanating from the war in Ukraine forced the RBI last week to raise its inflation forecast for 2022-23 significantly.
Analysts are wary of the impact of the war on accelerating retail inflation, since India imports 80% of its crude oil requirements. The volatility in global markets could have a broader impact on prices of consumer goods in India. In February, inflationary pressures were visible in food items, driven by a spike in prices of oil and fats as India is dependent on importing edible oils, analysts said.
2. Neighbourhood updates
Pakistan’s month-long political turmoil could finally end this week when the National Assembly meets to elect a new prime minister after Imran Khan lost a no-trust motion moved against him by the Opposition. Shehbaz Sharif, the president of the Pakistan Muslim League (Nawaz), is said to be the frontrunner.
A total of 174 of the 342 members voted against Khan, making him the first prime minister to be removed via a no-confidence vote. No Pakistani prime minister has ever completed a full tenure. Prior to the vote, Khan had dramatically alleged a ‘foreign conspiracy’ to overthrow his government.
The crisis in India’s other neighbour, Sri Lanka, continues. The country is witnessing massive protests demanding the resignation of President Gotabaya Rajapaksa. Sri Lanka faces its worst economic meltdown since independence, with shortage of food, fuel and other essentials, driven by a balance of payments crisis. It is expected to continue seeking help from international fora.
3. IT earnings
Two of India’s largest information technology firms, Tata Consultancy Services (TCS) and Infosys, will announce their earnings for the March-ended quarter and the last fiscal this week. In the first three quarters of FY22, TCS’s net sales increased by around 3% in sequential terms, while that of Infosys rose by around 6%. Brokerage firms expect revenue growth to have continued in the March quarter amidst some moderation due to the high base effect, not just for the two giants but for the entire sector.
Market research firm Prabhudas Lilladher expects the revenue of the two companies to grow at 2.6% sequentially, while ICICI Direct pegs it at 3-3.5%. Robust demand coupled with technological transformation is leading the growth in the sector. However, the margins are expected to stay flat or even decline owing to supply-side pressures, as well as aggressive hiring, backfiring of attrition and wage hikes.
4. US inflation
Retail inflation in the US continues to shatter records, touching a fresh 40-year high of 7.9% in February. Soaring demand and the effects of the Russia-Ukraine war have caused the consumer price index to surge. However, some respite may be in sight: the Union Bank of Switzerland has forecast that inflation in the US may have peaked at 8.5% in March before it starts to cool off.
The Fed raised interest rates last month for the first time in three years. Further hikes are expected in the coming months. However, analysts feel that the Fed is at a tricky spot where it has to control inflation without risking a slowdown by the sudden rise in interest rates amidst persisting uncertainty of the war. The Fed has agreed to cut up to $95 billion a month from its asset holdings to further tackle inflation.
CPI figures for March are expected on Wednesday.
5. ECB interest rate
The war in Ukraine has sent Europe’s inflation challenge into a miserable zone, prompting some commentators to even project a recession later this year. As the war challenges both inflation and growth, the European Central Bank finds itself in a tricky spot when it reviews its monetary policy on Thursday. The economic sanctions on Russia have hurt Europeans no less: inflation surged to a record 7.5% in March according to a flash estimate, with food and energy prices reaching sky-high levels. While an interest rate hike to check inflation is not likely until growth stabilizes, the war has only led to murmurs of a further easing of monetary policy by the ECB. The central bank denies risks of stagflation, but 21 of 38 economists polled by Reuters saw a high or very high chance in the next two years.
All this means the ECB’s press read-out about the current predicament will have markets glued.
