Encouraging inflation figures will help markets: experts

Mumbai, June 8 (UNI) Market analysts here are upbeat over the latest inflation figures released by the Government today and predicted that they would eventually help the capital markets recover from the red next week.

''The Reserve Bank of India (RBI) Governor Dr Y V Reddy and Union Finance Minister P Chidambaram can now pat themselves on their backs with the benchmark inflation rate falling below 5 per cent for the first time in the last 10 months, even below the Central Bank's target,'' they said and forecast that this would be a key factor to uplift the bleeding bourses next week.

It may be noted here that Bombay Stock Exchange (BSE) Sensitive Index and the National Stock Exchange (NSE) Nifty Index had closed in negative territory for three successive sessions this week.

The point-to-point inflation rate fell to 4.85 per cent in the week ended May 26 from 5.06 per cent in the previous week, the Ministry of Commerce and Industry said in a statement, which analyst said was much below the average estimates of around 5.05 per cent and was also the lowest rate since the end of July last year.

''The main factor behind this feat is the appreciable decline in food items,'' a wide section of analysts told UNI.

It may be recalled here that in its annual monetary policy, announced earlier in April, the RBI had said that it aims to keep inflation close to 5 per cent in the fiscal year ending March 2008, and will bring it down to 4-4.5 per cent over the medium term.

The central bank left its benchmark short-term rates unchanged at that meeting, but added that it would act swiftly if needed. The unexpectedly sharp fall in inflation is unlikely to prompt a change in monetary policy, unless there is a further moderation in prices, experts opined.

It is pertinent to note here that last week Union Finance Minister P Chidambaram had said that high economic growth might put pressure on inflation, especially prices of essential commodities, if supply did not match the growing demand.

''India aims to bring down inflation to 4.0-4.5 per cent.

Inflation had come down in the recent weeks and the government was keeping a watch,'' he added.

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