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India Focus – Shares fall; headline inflation likely to fall below 6% by March; Toyota restarts India strategy
RIYADH: Indian shares fell on Monday, dragged down by technology and bank stocks, while worries over global growth kept investors on edge.
The NSE Nifty 50 was down 0.76% at 17,622.75 by 0400 GMT, while the S&P BSE Sensex was down 0.67% at 59,245.18.
India’s Nifty IT index fell 1.1%, while the Nifty Bank index fell 1.4%.
Kotak Mahindra Bank was the biggest loser in the NSE index with a 2.7% drop.
India’s headline inflation may fall below 6% by March: Analyst
Analysts said over the weekend that India’s headline retail inflation rate could fall below 6 percent by the fourth quarter of the fiscal year, ending the current cycle of rate hikes.
Analysts said the Reserve Bank of India is likely to raise the repo rate by 50-60 basis points by December, after minutes of the central bank’s Monetary Policy Committee meeting were released on Friday.
“We expect the RBI to hike rates twice by 25 basis points at its September and December meetings, bringing the repo rate to 5.90 percent,” said Rahul Bajoria, chief India economist at Barclays.
Bringing retail price increases close to the RBI’s 4% target is critical to sustaining medium-term economic growth, the committee said.
Some analysts said the repo rate could also rise sharply by 50 basis points next month.
“If the Fed hikes rates by another 75 basis points, a 50 basis point hike in September cannot be ruled out,” Gaura Sen Gupta, India economist at IDFC First Bank, said in a note.
Earlier this month, the Reserve Bank of India raised the bank’s key lending rate by 50 basis points to 5.40%, the third hike in four months, to curb rising price pressures.
The RBI has raised the repo rate by 140 basis points since May.
Toyota doubles hybrid investment in India
Toyota is restarting its strategy in India, betting that emerging markets will learn to like its hybrids.
The Japanese automaker, best known for its groundbreaking Prius, has struggled to sell its hybrid Camry sedan since it debuted in India in 2013, in part because the price tag is more than eight times the annual income of a middle-class family.
This time around, Toyota is determined to do it differently with low-cost hybrids, four company and industry executives and suppliers said, offering previously unreported details about the automaker’s sourcing, production and pricing strategies .
At the heart of the strategy is cutting costs by making full-hybrid powertrains in India, where the automaker’s factories are running well below capacity and sourcing key materials in the country.
Toyota is also using its partnership with Suzuki Motor, the majority owner of India’s largest automaker Maruti, to benefit from its low-cost engineering and mild-hybrid technology.
“The mixed bet is a turning point. It will be a touchstone for Toyota’s future and success in India,” a person with direct knowledge of Toyota’s plans told Reuters.
A full hybrid can drive electric power, while mild-hybrid technology can only complement an internal combustion engine to help reduce emissions. However, mild hybrids have smaller batteries and cost less.
(input from Reuters)
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