“The October CPI print surprised positively as it was much lower than our and the street expectations. It continued to be aided by the food component which shrunk on a sequential basis underscored by components such as fruits, vegetables and pulses. The earlier fears of Minimum Support Price (MSP) hikes feeding through to CPI has been allayed. However, the sharp increase in core inflation which is remaining sticky at ~6.2% is worrying, with components such as health and personal care, and household goods showing high sequential momentum.
We expect FY2019 headline inflation to remain very benign given the recent downturn in oil prices, stability in the rupee and mild inflation prints. The next inflation print could be even lower. We are however, concerned at the extreme food disinflation. IIP came as expected at 4.5% with slight moderation in manufacturing but consumer goods continue to show traction and bode well for Q2 FY2019 growth. In light of these developments, we believe the MPC would be on pause for a while now”.