The Great Fall
Adani Group stocks went through a massive meltdown after the reports of National Securities Depository Ltd (NSDL) freezing the accounts of its three portfolio investors.
These three FPIs - Albula Investment Fund, Cresta Fund, and APMS Investment Fund - hold shares worth more than Rs 43,500 crore in the Adani group of companies. Market sentiments took a hit post this development as investors faced uncertainty over the possible effect of the move.
This sudden development gave rise to the suspension of illegal funding in the company. The theory got further vindicated as Adani stocks have witnessed relentless rally over the last year or so.
However, the stocks are very likely to climb back to their original position now that the NSDL has issued a clarification on the issue. NSDL has stated that accounts of three foreign funds are not frozen pertaining to their activities in stocks of the Adani group of companies.
A Good Beginning
The monsoon season has started on a good note. As per the IMD data, the whole country has received 23% more rainfall than the long period average.
All regions in India, except for the East and Northeast, have received above-normal rainfall as of last week. It has been above normal in central India. And the season looks promising, with the Southwest monsoon progressing on expected lines. IMD has forecasted heavy rainfall across several states.
The current monsoon season is progressing on expected lines, which is a great positive for the agriculture sector. A healthy start to the monsoon season has paved the way for the timely commencement of the Kharif season as well.
It is crucial considering the government's ambitious crop production targets for the year. The agriculture ministry has announced the foodgrain production target of 307 million tonnes for FY22.
Rise of Retail Inflation
India’s retail inflation surged to six-month high levels as it touched 6.30% in May. A rise in CPI is on account of higher food and energy prices.
Food inflation spiked to 5.01% in May compared with 1.96% in April. Vegetable prices fell nearly 2% YoY, but other inflation in other items like fruits and eggs shot up nearly 12-15% in May 2021. Transportation costs also inched up the fuel prices, adding up to the increased inflation.
A sharp rise in retail inflation clearly indicates that the impact of COVID-19 led restrictions on the economy was far greater than anticipated.
Importantly, it has even managed to breach the RBI's threshold of 4% inflation target. And, the task for the monetary policy committee has just become a little difficult going into its next meeting.
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