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Every Monday, Mint’s Plain Facts section features five key data releases to watch out for during the coming week. Inflation data for December is due this week. In the corporate world, the new earnings season is set to start with top information technology (IT) firms first in the queue. The Omicron variant is spreading at an unprecedented pace, and anxious citizens will await state governments’ policy response. Here’s more:

Inflation

 

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India’s retail inflation has remained below the Reserve Bank of India’s upper tolerance limit for the last few months. However, with the fading base effect and rising prices of some food items, inflation based on the consumer price index could easily reach the 6% mark in December, according to analysts. This will be known when the data is released on Wednesday.

In December, inflationary pressures were visible in food items such as tomatoes, which recorded a 54% rise in prices from a year ago. Food prices had trended upward in November, with the food and beverage index rising to 2.6% from 1.8% the previous month. Moreover, the recent cut in excise duties on petrol and diesel hasn’t offered much relief.

With core inflation already above 6%, a similar headline print could set a tough backdrop for the monetary policy committee’s next meeting in February, even as the Omicron variant is emerging as a threat to the ongoing growth recovery.

Covid Updates

 

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Despite travel restrictions and an urgent ramp-up in booster shots, the Omicron variant of covid-19 has spread the world over in just over a month. India reported nearly 160,000 new cases on Saturday, from below 10,000 just a fortnight ago. The coming few days will be critical to cap the infection rate ahead of five state elections next month. The Election Commission may take a call later this week on its ban on campaign rallies in place until 15 January. Anxious Indians will also watch out for fresh curbs by local governments.

Elsewhere, the US, the UK, and France have seen all-time high infections, necessitating lockdowns again. While hospitalizations are rising, the silver lining is the Omicron variant appears to be milder. Vaccinations remain the only solution, and India has taken a major step on that front by making older children eligible this month.

IT earnings

 

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Leading IT companies—Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies—will kick off the Q3 results season this week. The sector has benefited from a boom in digitalization and cloud services during the pandemic. Analysts expect strong Q3 numbers for IT services leaders despite the year-end holidays. Even last year, seasonality had little impact on performance. This time, lower furloughs and deals won in previous quarters will drive growth. 

ICICI Direct Research pegs topline year-on-year growth at 11-20% for HCL Tech, TCS, and Infosys and 29% for Wipro. However, the rupee’s depreciation will dampen dollar revenue to some extent. Supply-side pressure in terms of wage hikes will restrict bottomline growth in proportion to revenue expansion. But, all four firms may see sequential improvement in margins, with Wipro reporting lower figures than the other three.

HDFC Bank Results

 

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HDFC Bank, the country’s largest private lender, will release financial results for the quarter ended December on Saturday. Analysts expect growth in all key parameters as the economy stayed on course during the quarter. 

Loan growth, which has acquired consistent momentum, will gain further fuel from the festive pick-up seen in the previous quarter, but the third wave of covid-19 could dampen sentiment going further.

In a recent update, the bank reported total advances picking up to 12.6 trillion in the December quarter, growing 16.4% from the same period a year ago. Retail lending, which was the worst hit by the pandemic, grew around 13.5% from a year ago and 4.5% on a sequential basis. Commercial and rural loans reported growth of 29.5%. These segments are set to support overall growth, said analysts at Motilal Oswal, while cautioning over asset quality and slippages.

US Inflation

 

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Retail inflation in the US reached a 40-year high of 6.8% in November, and has stayed above 5% for six consecutive months. The rise in prices was across sectors, including food, housing and fuel. Modest growth in retail sales even during Christmas time reflected the price pinch the US consumers are facing. The December inflation figures are awaited on Wednesday. The US Federal Reserve for the first time dropped “transitory" from its FOMC minutes released last week. It acknowledged that the inflation has stayed elevated and was “more persistent and widespread than previously anticipated". All members of the committee have revised up their forecasts for inflation for 2022, and many have done so for 2023 as well.

Noting that growth is on track, with robust demand and falling unemployment, the Fed has decided to terminate its pandemic-era bond purchases in March and likely raise the three key interest rates by the end of next year. 

 

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