RBI needs to tighten rates further, says Standard Chartered

With Indian stock markets witnessing an unabated fall, growing menace of inflation in India and the growing attraction of US equities are the two major factors which experts are eyeing at.

Food inflation in India for the week ended January 22 came in at 17.3%, showing no sign of the usual fall one sees in winter

With higher petrol and aviation turbine fuel (ATF) prices coupled with a mark up in many industrial products like steel, metals, coal and iron ore even manufactured products like cars and bikes, the consensus now is that the overall wholesale price inflation in January will be 8.6% and may at best fall to 7.5% by March and that too because of a base effect.

Most analysts are, therefore, preparing for an elevated 7-8% average inflation for calendar year 2011, leading them to expect more rate hikes.

Consequently, a series of brokerages have begun down grading India