REUTERS - India's headline inflation slowed for a third straight month in April to 4.89 percent, a level seen comfortable for the RBI to persist with monetary easing to revive a flagging economy.
April's reading is the lowest since November 2009 and is well below the 5.50 percent estimated by analysts in a Reuters poll. The wholesale price index, India's main inflation measure, rose an annual 5.96 percent in March.
SHAKTI SATAPATHY, FIXED INCOME ANALYST, AK CAPITAL, MUMBAI
"The data is significantly below the market consensus and is largely driven by a demand moderation as being highlighted in the consecutive fall in the core inflation and decline in food article prices.
"Having said that, the upward revision in the February numbers shouldn't be taken in isolation and is expected to be closely looked at by the central bank. Though the current retail inflation level gives some comfort, the suppressed inflationary factors coupled with trade deficit data would be pivotal in announcing any big-step monetary leap in the coming meet."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"Increased growth risks in the manufacturing sector are strongly reflected in a sharp drop in core inflation to 2.77 percent.
"Emerging inflationary scenario combined with a skewed growth picture pained by the IIP reading suggests that both RBI and government will now have to concentrate on providing stimulus to growth, as inflation has ben coming off sequentially."
INDRANIL PAN, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
"I don't think this number will prompt RBI to cut the repo rate by 50 basis points (in June). The RBI needs to be very comfortably rooted on inflation pressures like coal prices, electricity prices, forex depreciation impact, diesel price increase impact and current account and fiscal deficit.
"It will want to anchor inflation within 4-5 percent. Since RBI expects inflation to rise post September, I don't think the governor will risk cutting rates aggressively given that inflation risks can emerge faster. Also, since banks are not cutting lending rates, big rates cuts could get wasted."
RAHUL BAJORIA, REGIONAL ECONOMIST, BARCLAYS CAPITAL, SINGAPORE
"With food prices expected to remain stable, manufacturing prices weak due to slow growth and commodity prices stable, inflation in expected to be on a broad downtrend for the next six months and this, we believe, opens up room for more rate cuts.
We think there is a possibility of as much as 75 basis points more rate cuts in the next six months, including 25 basis points in the next policy in June. With CPI (consumer price index) moving at the margin and WPI easing, inflation expectations should start coming off, which should be the key factor for the central bank to consider for its rate stance.
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI
"There is across-the-board softness, and we do expect some easing in June or July by the RBI, a 25 basis points rate cut. Earlier, we were looking at June but given the concerns on current account, and the fact that monsoon outlook will get clearer in July, it allowed us to think probably it probably could be June or July when RBI cuts rates.
"After the 25 bps cut, we expect a longish pause."
SURESH KUMAR RAMANATHAN, HEAD OF REGIONAL INTEREST RATES AND FX STRATEGY, CIMB, KUALA LUMPUR
"Lower than expected inflation, justifies recent RBI easing and the typical reaction in the OIS (overnight indexed swap) market. While broad-based growth slowing is anticipated in Asia, the relative softness in price pressures in India is not surprising.
"While further rate cuts are still evenly balanced, the shift in sentiment in OIS markets will continue. Market is leaning closer towards receiving rather than paying on OIS rates complex."
RADHIKA RAO, ECONOMIST, DBS, SINGAPORE
"Cast against the backdrop of deferred diesel price adjustments, weak aggregate demand and tame food costs, it is not surprising that inflation remains non-threatening. The easing-off in inflation on sequential basis is becoming notable in recent months.
"This release, in isolation, provides sufficient policy leeway, though the over 70 percent jump in April's trade deficit has washed CAD worries to the shore once again.
"In addition, the debate on which inflation metric the RBI must be monitoring also holds water, with CPI inflation flagged as a better representative. To this extent, the authorities might prefer to sit on their hands in June and act in July instead."
* Markets reacted to the inflation data when Bloomberg TV first reported it, citing unnamed sources.
* The benchmark 10-year bond yield fell 3 basis points to 7.54 percent from levels before the TV report.
* The benchmark 5-year swap rate fell 5 bps to 6.77 percent, while the one-year rate dropped 3 bps to 7.15 percent.
* The partially convertible rupee did not react immediately but gradually rose to 54.56 from 54.68 before the TV report. It had closed at 54.73/74 on Monday.
* The BSE Sensex gradually extended gains to as much as 0.7 percent and pared some of the rise after the official data release. (Reporting by India treasury and markets teams)