WPI is not being looked at in the same light as the CPI inflation. The central bank is focusing more on the latter for key policy decisions. The central bank is to continue to keep the rate cuts on the hold till CPI declines closer to 6 per cent, say analysts.
"The market is right now bothered about the US Federal Reserve's meeting on Wednesday. Concerns of earlier-than-expected hike in US interest rates are keeping the market on toes," said Dipen Shah, Head- Private Client Group Research, Kotak Securities
The market is also taking the WPI inflation figures, which are known to be fluctuating, with a pinch of salt. A declining trend for next couple of months will be required to reach a conclusion, say analysts.
The manufacturing sector data from IIP and WPI are signaling at stagflation and that could be hurting the sentiment as well.
"The IIP figures were disappointing on Friday. Manufacturing sector showed a decline and in today's WPI figures, manufacturing data showed similar trend. In the manufacturing sector, both production and prices are on a decline, which could be a sign of stagflation," said Debopam Chaudhuri, Chief Economist, ZyFin Research.
According to him, the market is also not clear with mismatch in food inflation figures in CPI and WPI. This could also be keeping the market jittery.
The WPI food price index dipped substantially to 5.15 per cent versus 8.43 per cent in July. CPI inflation slowed to 7.8 per cent in August from nearly 8 per cent in the previous month. However, CPI food inflation in August rose to 9.42 per cent over 9.36 per cent in July.
The market is now awaiting the US Federal Reserve's comments on rate hike. The market may witness bout of profit booking if there is a hint of earlier than expected rate hike.
Investors should use it as an opportunity to buy on declines, say experts.
"A heavy disinvestment programme, end of US Quantitative Easing in October accompanied by looming interest rate hikes amongst others could, provide opportunities for correction. However these will only be opportunities to buy," said Dilip Bhat, Joint MD Prabhudas Lilladher.
"The next five years will see markets in upward channel complimented by PE Re-rating & strong domestic participation from all investors big & small," he added.
At 01:45 p.m.; the Nifty was at 8,051.95, down 53.55 points or 0.66 per cent. It touched a high of 8077.30 and a low of 8030 in trade today.
The S&P BSE Sensex was at 26,850.37, down 210.67 points or 0.78 per cent. It touched a high of 26,998.07 and a low of 26,813.02 in trade today.
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