Key Points

Strong cereal production, well stocked granaries, lower oil prices and cheaper exports from China are likely to keep inflation lower for longer, HSBC Global Research said in the report.

The broking firm said that average inflation for the current quarter at 1.8 per cent, lower than the RBI’s forecast of 2.1 per cent. "Consumer price inflation in September is projected to be between 1 per cent and 1.5 per cent," it said.

Gold remains a significant factor that is keeping the core inflation high, with a 40 per cent YoY price increase adding nearly 43 basis points to the CPI in August, the statement said.

HSBC forecasted that recent GST rate cuts will soften the momentum in the price uptick of personal care items in the coming months.

Vegetable and fruit prices increased in August due to rain-related supply disruptions, while prices of cereals and pulses continued to decline. Core inflation, excluding food, fuel, housing, and gold, was recorded at 3.2 per cent year-on-year, much below the RBI's target, the firm noted.

The firm, however, noted that excessive rains and flooding around north-west India, particularly Punjab remains a concern.

Government spending, particularly capex, which has been growing 33 per cent YoY in April to July period may begin to slow in 2HFY26 to settle close to the budgeted growth of 10 per cent, it noted.

The research firm earlier this month gave a 'neutral' stance on Indian equities, even though it maintained that five out of nine risk factors for Indian markets are improving.

The earnings growth is expected to moderate to 8–9 per cent in 2025, though the consensus estimate of earnings growth is 11 per cent for calendar year 2025, the brokerage said.

- IANS