Here is BOFA Merrill’s account of the current situation in India. IN a report it said,
expect the RBI to hike policy LAF rates by 25bp in its July 27 policy. We believe May industrial growth, after all, will likely post a high 16.5% on July 12. We also expect June inflation to persist at 10% levels on July 14. Besides these figures, it is critical that the sowing month of July gets the normal rains that the Met forecasts. The markets will also keep an eye on the June quarter results with the BSE Sensex, at 15.2x 1-year forward PE, trading richer than the region. Finally, Eurozone bank stress results, likely due July 23, remain an event risk.
We expect June WPI inflation to come in at 10%, comparable to April’s 10.2%. This should support our call of inflation peaking off over the summer at 10-11%. We expect May industrial growth to come in at a very high 16.5%.