Risks To Upcoming Inflation Print Highlighted By HSBC

On the upcoming WPI print HSBC says: "WPI inflation (survey: 12.15% y-o-y, prior: 12.94% y-o-y) likely to stay in double digits. We note that in a media interview, the RBI governor downplayed the inflation risks expecting inflation to be transitory and emphasised that any hasty withdrawal of monetary policy support could pose risk to the nascent recovery (8 July). However, risks are clearly growing that the central bank may be behind the curve and inflation could prove sticky rather than transient. We therefore maintain our overall bearish bias on INR rates. During the week, there is also likely to be focus on the announcement on the details of government securities that will be included in next government securities acquisition (GSAP) purchase auction to be held on 22 July. An inclusion of on-the-run securities could provide some relief at Gsec auction and somewhat help reverse the recent underperformance of Gsec vs ND OIS."