ET Intelligence Group: The latest forecast by the India Meteorological Department predicting a stronger probability of deficient rainfall has heightened concerns over its effect on the country’s agricultural output and inflation trajectory this year. While prices of certain agri commodities such as oil seeds may be affected, the impact on the gross value added (GVA) of agriculture sector and on overall GDP growth is likely to remain limited given their weakening correlation with the extent of rainfall over the past two decades.

An analysis by ETIG shows that the correlation between the data on rainfall departure from the long period average (LPA) and agriculture GVA has remained negligible at under 0.05 over the past 25 years.

The rainfall-GDP growth correlation,too, is lower at around 0.07. Last Friday, the India Meteorological Department revised its estimate of monsoon rainfall to 90% of the LPA from 92% and raised the probability of the outcome to 60% from 35%. Economists cite multiple factors responsible for the lower correlation, including rising irrigated crop area, a growing share of Rabi crops in total farm production, and faster growth in livestock, forestry and fishing.

Additionally, the share of agriculture in the country’s total GVA has fallen to around 14% in FY25 from around 20% in FY12, driven by the growing services sector. ”The area under irrigation as a share of gross cropped area rose to 55.8% per cent in FY23 from 41.7% in FY02 implying lower dependence of crop output on direct rainfall,” said Rajani Sinha, chief economist, CareEdge Ratings.

A shift towards higher crop output during October-March period, known as the Rabi crop has also influenced the correlation. According to the third advance estimates of food grain production released by the Ministry of Agriculture and Farmers Welfare, Rabi output is expected to increase by 6.7% year-on year to 180.5 million tonnes while the Kharif crop is likely to grow by 3.9% to 176 million tonnes in FY26.

The share of Rabi crop in total food grains is expected to increase to nearly 48% from 47.3% a year ago while it will fall for Kharif crop to 46.8% from 47.4%.

“Rabi crop output has surpassed the Kharif output. The former relies more on winter rains and soil moisture. Hence reservoir positions and rain precipitation are important factors for Rabi,” said Devndra Pant, chief economist, India Ratings. The Kharif crop, which spans from June to September, relies heavily on the south-west monsoon and therefore it is more susceptible to the monsoon variations.

A crypto expert has shared her macro prediction for Ethereum (ETH), warning of an imminent price crash that could see the second-largest cryptocurrency plummet to as low as $800, or even $400 per coin. While this would represent a massive bearish move given ETH’s current price, the analyst argues that such a decline is important for a market reset, where prices rediscover real demand and sustainable support. 

Analyst Says Ethereum Crash Is Critical For A Market Reset

Rafaela Rigo, a crypto market analyst, has presented a compelling Ethereum price analysis on X that has caught the attention of traders and investors alike. Rigo shared a chart analysis from 2024 in which she accurately predicted that the Ethereum price would plummet to $1,900 after the cryptocurrency had formed a bull run top in that same cycle. That same analysis had also forecasted  a price drop to $800, a level the analyst identified as a “great buying opportunity.”

Related Reading

Notably, Rigo has now updated that 2024 chart analysis to predict Ethereum’s next move this cycle. She has boldly forecasted that ETH’s price could crash to $800 during the ongoing bear market. With the cryptocurrency currently trading above $2,100, a decline to that level would represent a staggering loss of more than 61%. 

Taking an even more bearish stance, Rigo stated that an extended price drop to $400 was still on the table for Ethereum, especially if the cryptocurrency is unable to contain its bearish momentum. If ETH falls to this level, it would mark a historic low, pushing the second-largest cryptocurrency back to levels not seen since 2019. 

Rigo noted in her analysis that she had previously described the 2024 cycle as a catabolic one, and expects the current cycle to be the same. She added that while $800 would be a painful downward slide, it was necessary for a proper market reset.

The analyst emphasized that the crypto market desperately needs this reset to weed out the bad projects flooding into the space and growing daily. She also noted that many of these new crypto projects are pump-and-dump schemes that have weighed on sentiment and caused a significant number of investors to exit the market. 

Notably, Rigo described her forecast as a “macro price prediction,” clarifying that it would still take time for everything to unfold as anticipated. In the meantime, she urges investors and traders to remain vigilant, monitor market movements carefully, and avoid emotional trading.

Analyst Predicts Ugly Price Crash For ETH Soon

Market expert Ted Pillows has also shared a new Ethereum price analysis, expressing caution over the cryptocurrency’s recent price action and a Bear Flag formation. Pillows warned that this Bear Flag could have very dire consequences for ETH’s price. 

Related Reading

At the time of writing, the cryptocurrency is sitting above $2,100 following weeks of bearish pressure and volatility. Despite this resilience, Pillows cautioned that if ETH fails to hold above $2,100, “things could get ugly.” He has predicted a potential price crash down toward $1,960, representing a major decline of more than 6% from current levels. 

Featured image from Pngtree, chart from Tradingview.com

In a recent QuickTake post on CryptoQuant, XWIN Research Japan explains how the rising Japanese bond yields are currently affecting Bitcoin’s price action.

Japanese Gov’t Bonds Face Downturn Amid Macroeconomic Pressures 

According to XWIN Research Japan, yields on Japanese Government Bonds (JGBs) have been rising amid persistent inflationary pressures, expectations of policy normalization, and rising concerns over fiscal expansion. In response, there has been a corresponding fall in bond prices, indicating that Japan’s domestic institutions, e.g., banks, are simultaneously holding through heavy unrealized losses.

With approximately ¥390 trillion (approximately $2.6 trillion USD) currently invested in JGBs, even a modest 1% increase in yields could push tens of trillions of yen worth of holdings into negative territory, amplifying financial strain across the system.

Expectedly, this scenario has exerted significant pressure on institutional investors, forcing adjustments on their balance sheets. According to the crypto research group, risk assets, including Bitcoin, are the easy targets of this “rebalancing” activity. Considering that Japan maintains a large external investment portfolio, any liquidity withdrawal exhibits a signal effect on the market.

Therefore, this chain of rising yields, which leads eventually to liquidity contraction, often affects Bitcoin directly. Notably, historical patterns have suggested that low-rate environments often support price growth or expansions, while increasing rates typically impede the flagship cryptocurrency’s growth.

Stablecoin Supply Surges Toward Record Levels

Furthermore, XWIN Research Japan cites the All Stablecoins (ER20): Total Supply metric to report a significant growth in the available stablecoin supply. According to research analysts, this suggests that there is actually capital waiting on the sidelines. However, this available liquidity is clearly not being introduced into risk markets. 

Hence, it becomes apparent that Bitcoin is currently within a classic environment where liquidity exists, but is yet to be deployed. Interestingly, exchange flows also reveal that about $9.6 billion left the Bitcoin market in early 2026, with capital evidently rotating into stablecoins. These two conditions also contribute to weakened demand, as rising rates already cause demand to taper.

Therefore, until macroeconomic conditions improve, the Bitcoin price might continue to struggle in the long-term, as institutional demand might even then become weaker. As of this writing, Bitcoin is valued at $67,391, reflecting a positive daily shift of 0.76%. On larger time frames, the premier cryptocurrency reports a weekly gain of 1.34% and a monthly loss of 5.47%. With a market cap of $1.34 trillion, Bitcoin remains the world’s 13th largest asset and largest digital asset.

Bitcoin is facing a critical juncture as its macro retracement converges with a tight mid-range battle between $86,000 and $100,000. With bearish patterns confirmed and short-term support holding, the market now waits to see if bulls can reclaim momentum or if a deeper pullback is on the horizon.

Bitcoin Confirms Macro Top: Bearish Phase Underway

According to an update from Crypto Patel, Bitcoin appears to have confirmed a market top and is now transitioning into a broader macro retracement phase. The loss of a key bullish support level has shifted the market structure into a bearish phase.

Related Reading

The chart shows that a Head and Shoulders formation has fully played out. Classical technical rules suggest that the 162% downside projection has already been achieved, reinforcing the view that a cycle top is in place and a larger trend reversal is underway.

Looking at the macro Fibonacci retracement from the bear-market low to the recent peak, several key levels come into focus. These include the 0.382 retracement, which sits near $56,700, and the 0.5 level around $44,000, representing a zone of potential bear-market acceptance. Additionally, the 0.618 retracement near $35,000 stands out as the strongest long-term support area.

On the liquidity side, an unfilled fair value gap between $98,000 and $100,000 acts as a magnet for a short-term relief bounce before the broader downtrend resumes. Overall, the macro outlook for Bitcoin remains bearish. 

While a bounce toward the $98,000–$100,000 region is possible, the dominant path points toward a deeper move into the $70,000–$60,000 Fibonacci supports. Traders are advised to wait for confirmation and remain flexible, respecting multiple scenarios as the market unfolds.

BTC Trapped: $96,000–$100,000 Cap Meets $86,000 Support

Bitcoin remains range-bound between two critical zones as noted by CyrilXBT. Price is hovering near the $90,300 area after facing another rejection from the $96,000–$100,000 supply zone and the 50-day EMA. This region has consistently capped upside attempts over the past several weeks.

Related Reading

On the downside, buyers continue to show up around the $86,000–$88,000 demand zone, preventing the price from slipping into a broader breakdown and keeping BTC locked within its current range. From a broader market perspective, Bitcoin previously cooled off while tech stocks surged. As momentum in tech begins to slow, BTC is attempting to stabilize, but a decisive reclaim of the $96,000–$100,000 zone is still required to shift momentum.

A sustained move above $100,000 would open the door to trend reversal. Conversely, a loss of the $88,000 support could expose Bitcoin to a deeper pullback toward the $72,000–$76,000 region. Until either scenario plays out, price action remains choppy, and patience is warranted.

Featured image from Pixabay, chart from Tradingview.com

Read the headline, it says Part 2 (A). Why this subpart? When we decided to look at inflation, we assumed that we would be able to explain it in one article. But it is too big and complex a subject. The word “inflation” might appear the same in the US, India, or for any emerging or developed economy. But the fact is that inflation’s impact is very different for each country. While the Japanese central bank has been waiting for years for the inflation rate to inch higher, the RBI is making all the efforts to ensure it does not rise beyond a certain level. So, in Part 2 (A) we take an overview of inflation, types of inflation, and how it is calculated. In Part 2 (B) we will look into how it impacts different segments of society, strategies to hedge against it, and which investments (including equity and real estate) are best to beat it in the long term.

Inflation is one of the most powerful and misunderstood forces in economics. Now, here is what most of us don’t realise: Inflation isn’t always the enemy. In fact, a little bit of inflation is actually healthy for the economy. The challenge lies in understanding when inflation helps and when it hurts.

By the end of this article, you will never look at rising prices the same way again.

Inflation Overview

Think of inflation as a slow leak in your financial tyre. Just as a tyre with a small puncture gradually loses air pressure, your money gradually loses purchasing power. The Rs. 500 note in your wallet today will buy less tomorrow, and even less the day after that.

This isn’t because the physical note has changed – it’s because the prices of goods and services around you are slowly but steadily rising.So, what is inflation? The RBI defines inflation as “the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling”. In India, we primarily measure inflation using the Consumer Price Index (CPI), which tracks the cost of a basket of goods and services that represents what an average Indian household purchases.

This basket includes everything from food items like rice, wheat, and vegetables to services like healthcare, education, and transportation.

When the RBI announces that inflation is 2.07%, it means that this entire basket of goods and services costs 2.07% more than it did a year ago. If you spent Rs. 10,000 on these items last year, you would need Rs. 10,207 to buy the same things today.

But inflation isn’t uniform across all goods and services. Food inflation might be running at 3%, while fuel inflation could be at 1%, and housing inflation at 4%. This is why your personal experience of inflation might feel very different from the official statistics. If you drive a lot and fuel prices have been stable, you might barely notice inflation.

The key insight is that inflation is not just about rising prices – it’s about the declining value of money itself. This is why economists often describe inflation as a “hidden tax” that affects everyone, regardless of their income level or financial sophistication.

To understand this better, consider the power of compounding in reverse. If inflation runs at 4% per year, the purchasing power of Rs. 1,00,000 today will be equivalent to only Rs. 96,000 next year, Rs. 92,160 the year after, and Rs. 82,270 after five years.

This erosion happens silently, without any dramatic announcements or visible changes, making it one of the most insidious threats to long-term wealth preservation.

Anatomy of Inflation: How Prices Rise in India

Understanding inflation requires looking beyond the headline number to understand what drives prices higher in the Indian context. Inflation does not happen in a vacuum – it is the result of complex interactions between supply, demand, government policies, and global economic forces.

Demand-Pull Inflation occurs when there is too much money chasing too few goods. Imagine the festival season in India when demand for gold, clothes, electronics, and food items surges. If supply cannot keep up with this increased demand, prices rise.

This happened dramatically during the post-Covid recovery period when pent-up consumer demand had to contend with supply chain disruptions, leading to price increases across many categories.

Cost-Push Inflation happens when the cost of producing goods and services increases, forcing businesses to raise prices to maintain their profit margins.

In India, this often occurs due to rising crude oil prices, since the country imports about 85% of its oil requirements. When global oil prices rise, it increases transportation costs, manufacturing costs, and eventually, the prices of almost everything in the economy.

The ripple effects of oil price increases in India are particularly pronounced. Higher diesel prices affect trucking costs, which impact the prices of goods transported across the country. Higher petrol prices affect commuting costs for millions of Indians.

And higher LPG prices directly impact household budgets. The interconnected nature of the Indian economy means that energy price shocks quickly transmit throughout the system.

Agricultural input costs also play a crucial role in cost-push inflation in India. When fertiliser prices rise due to global supply disruptions or when monsoons fail and irrigation costs increase, farmers face higher production costs.

These costs eventually get passed on to consumers in the form of higher food prices. Given that food accounts for nearly 46% of the CPI basket in India, agricultural cost pressures can significantly impact overall inflation.

Role of Gold, Rupee & More

The relationship between exchange rates and inflation is particularly important for India. When the rupee weakens against the dollar, it makes imports more expensive in rupee terms.

Since India imports a significant portion of its energy needs and raw materials, a weaker rupee can quickly translate into higher domestic prices.

Gold provides an interesting case study of imported inflation in India. Indians purchase about 800-900 tonnes of gold annually, making India one of the world’s largest gold consumers. Since most of this gold is imported, changes in global gold prices and rupee-dollar exchange rates directly affect the cost of gold for Indian consumers.

During periods of global uncertainty or rupee weakness, gold prices in India can rise sharply, affecting household budgets and savings patterns.

Sectoral Inflation Dynamics in India reveal interesting patterns that help explain why different groups experience inflation differently.

Food inflation tends to be highly volatile, driven by monsoon patterns, crop yields, supply chain inefficiencies, and seasonal demand variations. A poor monsoon can lead to crop failures and sharp increases in food prices, while a good monsoon can lead to bumper harvests and falling food prices.

Housing inflation in India is often driven by real estate cycles, urbanisation trends, and government policies. In rapidly growing cities like Bengaluru and Gurgaon, housing inflation can be much higher than the national average due to strong demand from IT professionals and limited land supply.

Services inflation, including healthcare, education, and personal services, tends to be more persistent and is often driven by rising labor costs and quality improvements.

Understanding these different sources of inflation helps explain why the RBI’s job of controlling inflation is so challenging. Monetary policy tools like interest rates are most effective against demand-pull inflation but have limited impact on cost-push inflation caused by oil price shocks or crop failures.

This is why the RBI often has to look through temporary supply shocks while remaining vigilant about underlying inflation trends.

RBI’s Inflation Target: Why 4% Matters

In 2016, India adopted a formal inflation targeting framework, with the RBI mandated to keep the CPI inflation at 4% with a tolerance band of +/- 2%. This means the RBI aims to keep inflation between 2% and 6%, with 4% as the ideal target.

But why 4%? Why not 0% or 2% or 6%? The answer tells us a lot about how modern economies function and why getting inflation “just right” is crucial for India’s economic development.

The choice of 4% reflects a careful balance between the costs and benefits of inflation in the Indian context. Zero inflation or deflation might sound appealing to consumers who are tired of rising prices, but it can be economically dangerous.

When prices are falling or stagnant, consumers and businesses delay purchases, expecting even lower prices in the future. This reduces demand, leading to lower production, job losses, and economic stagnation.

Consider the Japan story. Japan’s experience with deflation in the 1990s and 2000s serves as a cautionary tale of how falling prices can trap an economy in a vicious cycle of declining demand and growth.

In the Indian context, deflation would be particularly harmful given the country’s high debt levels and the need for continued investment in infrastructure and development. When prices are falling, the real burden of debt increases, making it harder for businesses and individuals to service their loans.

This can lead to a debt-deflation spiral where falling prices increase debt burdens, leading to defaults, which further reduce spending and push prices down even more.

Very low inflation (0-2%) can also be problematic because it provides little buffer against deflationary shocks. If inflation is running at 1% and the economy faces a negative shock – such as a global recession, a major crop failure, or a financial crisis – it can quickly slip into deflation.

Also, very low inflation can make it difficult for the central bank to stimulate the economy during recessions, as real interest rates remain high even when nominal rates are cut to zero.

The European Central Bank’s struggles with persistently low inflation in the 2010s illustrate this challenge. Despite cutting interest rates to negative levels and implementing massive quantitative easing programmes, the ECB found it difficult to raise inflation to its target of close to 2%.

This experience influenced central banks worldwide, including the RBI, to ensure that their inflation targets provide adequate room for maneuvering during economic downturns.

Moderate inflation (2-4%) is generally considered optimal for most developed economies. It provides enough flexibility for relative price adjustments, gives the central bank room to maneuver during economic downturns, and is low enough not to significantly distort economic decision-making.

In this range, inflation acts as a lubricant for the economy, allowing for smooth adjustments in relative prices and wages without causing major disruptions to economic planning.

India’s 4% target reflects the country’s specific economic characteristics and development needs. As a developing economy with ongoing structural transformation, India experiences more relative price volatility than developed economies.

The agricultural sector still employs a large proportion of the workforce and is subject to weather-related supply shocks. The services sector is growing rapidly, leading to structural changes in relative prices. The 4% target provides sufficient room for these adjustments while keeping inflation expectations anchored.

The 4% target represented an ambitious but achievable goal that would bring India’s inflation in line with other emerging market economies while acknowledging the structural factors that might keep Indian inflation somewhat higher than in advanced economies.

The tolerance band of +/- 2% acknowledges that perfect inflation control is neither possible nor desirable. The band provides flexibility while maintaining credibility. It recognises that attempting to keep inflation exactly at 4% at all times would require such frequent and dramatic policy adjustments that it could destabilise the economy.

The band also reflects the understanding that different types of inflation shocks require different policy responses. A temporary spike in food prices due to a poor monsoon might push inflation above 6% for a few months, but this does not necessarily require an aggressive monetary policy response if the underlying inflation trend remains stable.

Conversely, if inflation expectations start to drift upward and core inflation begins rising persistently, the RBI might need to act even if headline inflation is still within the target band.

Benefits of ‘Inflation Targeting’

Since the adoption of inflation targeting, India’s inflation performance has improved significantly. From an average of nearly 10% in the decade before 2016, CPI inflation has averaged around 4.5% since the framework’s adoption.

The current inflation rate of 2.07% (as of August 2025) represents the success of this framework, though it also raises questions about whether inflation might be too low and whether there is room for more accommodative monetary policy to support growth.

The benefits of achieving the inflation target extend far beyond price stability. Predictable, low inflation helps businesses plan investments with greater confidence, knowing that their cost structures will not be disrupted by unpredictable price changes.

It encourages long-term savings by ensuring that the real value of savings does not erode rapidly. It protects the purchasing power of fixed-income earners like pensioners, salaried employees, and those living on fixed deposits.

Low and stable inflation also helps maintain the competitiveness of Indian exports by preventing excessive domestic price increases that would make Indian goods more expensive in international markets. It reduces the need for frequent wage negotiations and price adjustments, lowering transaction costs throughout the economy.

Perhaps most importantly, it helps build trust in the currency and the economic system, encouraging long-term investment and economic planning.

Challenges of Inflation Targeting

The challenges of inflation targeting in India, however, are substantial and unique. Food price volatility, driven by monsoon dependence and supply chain inefficiencies, can cause significant fluctuations in headline inflation that are largely beyond the control of monetary policy.

The large informal sector in India also complicates inflation targeting. Many prices in the informal economy are sticky and do not respond quickly to monetary policy changes.

This means that monetary policy transmission – the process by which changes in policy rates affect broader economic conditions – can be slower and less predictable than in more developed economies.

Global factors also pose challenges for inflation targeting in India. As a major importer of crude oil and other commodities, India is vulnerable to global price shocks that can push domestic inflation outside the target range regardless of domestic monetary policy.

Measuring Inflation: CPI Basket & Its Role

The CPI is India’s primary measure of inflation, but understanding how it is constructed and what it includes is crucial for interpreting inflation data and understanding its impact on your personal finances.

Remember that the CPI is not just a statistical construct – it reflects economic realities.

The dominance of food in the CPI basket has major implications for inflation dynamics in India. It means that a poor monsoon leading to crop failures can single-handedly push inflation well above the RBI’s target, even if all other prices remain stable.

Conversely, a bumper harvest can pull inflation down significantly, potentially below the lower bound of the target range.

Regional and Demographic Variations in the CPI basket mean that inflation affects different groups very differently. Rural CPI has a higher weight for food compared to urban CPI, reflecting the different consumption patterns of rural and urban households. This means rural households typically experience higher inflation when food prices rise, but lower inflation when services prices increase.

The implications of this rural-urban difference are significant for policy and politics. When food prices rise sharply, rural households – which are often poorer and spend a larger share of their income on food – bear a disproportionate burden.

This can lead to rural distress and political pressure for government intervention in food markets. Conversely, when services prices rise, urban households feel the impact more acutely.

State-wise CPI data reveals even more granular differences. States with higher food weights in their consumption baskets experience more volatile inflation, while states with higher services consumption see more stable but persistent inflation trends.

For instance, a state like Punjab, with a large agricultural population, will experience inflation differently from a state like Karnataka, with a large IT services sector.

CPI’s Limitations

The limitations of CPI as a measure of your personal inflation experience are important to understand. The CPI basket represents an average household, but your actual spending pattern might be very different.

If, say, you are a young professional spending 40% of your income on rent, 20% on dining out and entertainment, and only 15% on food, your personal inflation rate might be very different from the official CPI inflation.

Consider a typical IT professional in Bengaluru: They might spend Rs. 25,000 per month on rent, Rs. 15,000 on food and dining out, Rs. 10,000 on transportation and fuel, Rs. 8,000 on entertainment and shopping, and Rs. 7,000 on utilities and other expenses.

If rent increases by 10%, food prices rise by 3%, and other categories remain stable, this person’s personal inflation rate would be much higher than someone following the national CPI basket weights.

Quality Adjustments in CPI calculation attempt to account for improvements in product quality over time. When a new smartphone with better features costs the same as the previous model, the statistical agencies consider this a price decline in quality-adjusted terms.

However, these adjustments can sometimes understate the inflation experienced by consumers who do not upgrade to newer products or who value different features than those captured in the quality adjustments.

The challenge of quality adjustment is particularly acute for technology products and services. A mobile phone plan that costs Rs. 500 per month today might include unlimited data, while a Rs. 500 plan five years ago included only 1GB of data.

From a statistical perspective, this represents a massive price decline in quality-adjusted terms. But for a consumer who only uses 500MB of data per month, the price has remained constant while they are paying for features they do not value.

Substitution Bias occurs because the CPI basket is fixed for several years, but consumers change their consumption patterns in response to relative price changes.

If, for instance, chicken becomes expensive, consumers might switch to eggs, fish, or plant-based proteins, but the CPI continues to track chicken prices with the original weight. This can overstate inflation during periods of rapid relative price changes.

In the Indian context, substitution bias can be significant given the diversity of food options and the price sensitivity of consumers. When onion prices spike, households might switch to other vegetables or reduce onion consumption. When gold prices rise, some consumers might switch to silver jewelry or delay purchases.

The CPI does not capture these behavioral responses, potentially overstating the true cost of living increases.

New Product Bias arises because the CPI basket takes time to incorporate new products and services. When ride-sharing services like Ola and Uber became popular, they were not immediately included in the CPI basket, even though they affected transportation costs for many urban consumers.

Similarly, new financial services, digital entertainment options, and e-commerce platforms change how people spend money, but these changes are only captured when the CPI basket is updated every few years.

The rapid pace of technological change in India makes new product bias particularly relevant. Digital payments, online shopping, streaming services, and app-based services have fundamentally changed consumption patterns for millions of Indians, but these changes are reflected in the CPI with a lag.

Understanding Core Inflation helps filter out temporary price movements and focus on underlying inflation trends. Core CPI excludes food and fuel prices, which tend to be volatile due to supply shocks and seasonal factors.

Core inflation is particularly important for monetary policy because it better reflects the inflation pressures that the RBI can actually influence through interest rate changes.

Food price spikes due to poor monsoons or global oil price increases are largely beyond the RBI’s control, but core inflation reflects domestic demand and supply conditions that monetary policy can affect.

The Wholesale Price Index (WPI) provides another perspective on inflation, focusing on prices at the wholesale level rather than retail. WPI inflation often leads CPI inflation, as wholesale price changes eventually get transmitted to retail prices.

However, WPI has a much higher weight for manufactured goods and commodities compared to CPI, making it less relevant for understanding the inflation experience of households.

For individual financial planning, understanding these measurement issues helps you interpret inflation data more accurately and make better decisions about savings, investments, and major purchases.

If you know that your personal spending pattern differs significantly from the CPI basket, you can adjust your inflation expectations and financial planning accordingly.

Why Inflation Matters for Stocks

Higher inflation affects stock prices through multiple transmission channels. When inflation rises, companies face increased input costs for raw materials, labor, and energy. While some companies can pass these costs to consumers through higher prices, others with limited pricing power see their profit margins compressed.

Additionally, rising inflation typically prompts the RBI to raise interest rates, increasing the cost of capital and making fixed-income investments more attractive relative to equities.

The discount rate used to value future cash flows also increases during inflationary periods, reducing the present value of companies’ expected earnings. This theoretical framework, however, plays out differently across sectors and time periods in the Indian context, creating opportunities and challenges for different types of businesses.

The fact is that the relationship between inflation and Indian stock markets has evolved significantly since 2008. While high inflation periods like 2008-2014 demonstrated clear negative impacts on market performance and sectoral rotation, the post-2016 inflation targeting era has created more stable conditions for equity investments.

The key insight for investors is that moderate, predictable inflation (2-4%) can coexist with strong stock market performance, as evidenced by the Sensex’s journey from 26,000 to 85,000 during the inflation targeting period.

However, sectors continue to show differential sensitivity to inflationary pressures, with FMCG and healthcare showing resilience while real estate and banking remain more vulnerable to inflation-driven policy changes.

Looking Ahead: What’s Next in Our Economic Journey

As we continue our exploration of inflation, it is worth reflecting on how this knowledge connects to the broader economic concepts we will explore in the coming weeks. Inflation does not exist in isolation – it is intimately connected to interest rates (which we covered in the first part of this series), employment, economic growth, and international trade.

Next Week’s Preview: In Inflation Part 2 (B), we will look at how inflation does not affect everyone equally, creating winners and losers. It will also tell you how to become “inflation-aware” and protect your wealth.

The Bigger Picture: Each topic of this series builds on previous concepts to create a comprehensive understanding of how the economy works. Interest rates influence inflation, inflation affects unemployment, unemployment impacts economic growth, and growth affects everything from government finances to international trade.

By the end of our 52-week journey, you will see how all these pieces fit together to create the complex but understandable system we call the economy.

Glossary: Essential Inflation Terms

Consumer Price Index (CPI): A measure of the average change in prices paid by consumers for a basket of goods and services over time. India’s primary measure of inflation.

Core Inflation: Inflation excluding food and fuel prices, which tend to be volatile due to supply shocks and seasonal factors.

Cost-Push Inflation: Inflation caused by increases in the cost of production, such as higher wages or raw material prices.

Demand-Pull Inflation: Inflation caused by excess demand for goods and services relative to supply.

Deflation: A sustained decrease in the general price level of goods and services.

Disinflation: A slowdown in the rate of inflation, but not deflation (prices are still rising, but more slowly).

Hyperinflation: Extremely high and typically accelerating inflation, usually exceeding 50% per month.

Inflation Expectations: What people expect inflation to be in the future, which can influence actual inflation through wage and price-setting behavior.

Inflation Targeting: A monetary policy framework where the central bank sets an explicit target for inflation and uses policy tools to achieve it.

Real Interest Rate: The nominal interest rate minus the inflation rate, representing the true cost of borrowing or return on savings.

Stagflation: A combination of high inflation and high unemployment, typically accompanied by slow economic growth.

Wholesale Price Index (WPI): A measure of inflation at the wholesale level, focusing on prices of goods traded between businesses.

Tata Elxsi shares will be in focus on Friday after the company reported a 22% year-on-year decline in consolidated net profit to Rs 144 crore for Q1FY26, compared to Rs 184 crore in the same quarter last year.

Revenue from operations also fell 3.7% to Rs 892 crore from Rs 926 crore, impacted by macroeconomic headwinds and client-specific challenges.

Sequentially, profit declined 16% from Rs 172 crore in Q4FY25, while revenue dipped nearly 2% from Rs 908 crore.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at Rs 187 crore, down 26% from Rs 252 crore a year ago. Profit before tax (PBT) also fell 22% year-on-year to Rs 196 crore.

Also Read: Brokerages initiate coverage on Delhivery, 7 other stocks; up to 33% upside seen

Key Deals in Q1

Tata Elxsi secured a multi-million-dollar design and digital deal with a US-based global technology firm to support a major data and insights program for next-generation AI and product feature development.It was also selected as a strategic partner for medical device testing, certification, and regulatory compliance for a cardiovascular product portfolio. The company contributed through design consultation, tech architecture, advisory services, and integration of technology and content.Also Read: Vodafone Idea slides 57% in a year; analysts warn of further downside below Rs 6.30

Management Commentary

Commenting on the results, MD and CEO Manoj Raghavan said that the quarter was challenging across key markets, with macroeconomic uncertainties, industry and customer specific issues impacting R&D spend and decision making cycles across geographies. “The company has demonstrated resilience in protecting business in our largest vertical, executing on large deal wins across key verticals to create sustained revenue streams, and expanding our relationships with our customers,” Raghavan.

The earnings season kicked-off today with the announcement of TCS results which beat Street’s estimates. The Indian IT bellwether reported a 6% growth in its Q1FY26 consolidated net profit at Rs 12,760 crore versus Rs 12,040 crore in the year ago period.

Also Read: These 10 debt-free penny stocks rallied 75-355% in 1 year. Do you own any?

Tata Elxsi share price target

According to Trendlyne, the average target price for Tata Elxsi stands at Rs 4,846 — indicating a potential downside of 21% from current levels. Of the 15 analysts tracking the stock, the consensus rating is ‘Sell’.

Tata Elxsi stock performance

Tata Elxsi shares closed 0.16% lower at Rs 6,139.6 on Thursday, while the Sensex declined 0.41%. The stock is up 29% in the past three months but has declined 9% year-to-date and 23% over the past three years. Its market capitalisation currently stands at Rs 38,240 crore.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)

Bitcoin’s price action in the past 24 hours has been marked by a highly volatile phase that saw it briefly reach above the $106,000 mark. However, this was followed by a return to consolidation around the $103,000 price level. 

This intense volatility in the past 24 hours suggests that the Bitcoin price still has a long way to go before it reaches a price top. Amid this volatile movement, a new macroeconomic model, the Decode Macro Trend Oscillator (MTO), has pointed out when to expect Bitcoin’s price to top this cycle.

Decode’s Macro Trend Oscillator Model And Its Alignment With Bitcoin Peaks

The Decode Macro Trend Oscillator is a sophisticated tool designed by a Bitcoin analyst known as Decode on the social media platform X. The oscillator aggregates around 40 macroeconomic indicators, ranging from interest rates and global liquidity to industrial production and market volatility, into 17 carefully selected leading metrics.

Related Reading

These are then normalized and visualized as a histogram to produce a cyclical pattern that has historically aligned with Bitcoin’s major tops. A close look at the chart titled Bitcoin Liquid Index on the 1M candlestick timeframe reveals that the light green histogram bars have coincided with each of Bitcoin’s cycle peaks in 2013, 2017, and 2021.

These peaks are marked by vertical red lines, and the transitions from deep red to green territory on the oscillator appear to offer a visual cue for the end of bearish phases and the onset of price rallies. As of May 2025, the histogram remains in a deep red zone but has begun inching upward, with the most recent bar reading at -11.47, suggesting that macroeconomic conditions may soon start to favor a bigger rally for Bitcoin.

BTC Mode Configuration Fine-Tunes Cycle Top Prediction

Decode’s analysis goes beyond Bitcoin-specific indicators. In one of the accompanying charts of the S&P 500 Index of the 2M timeframe, a long-term comparison is made between the current global environment and the economic backdrop of the late 1980s and early 1990s. Interestingly, Decode’s macro trend oscillator proved reliable in estimating periods of downturns and expansions in both instances. 

Related Reading

In both instances, inflation pressure and declining consumer sentiment pushed the oscillator deep into negative territory for years. However, once the histogram flipped into the green, the economy and prices entered a prolonged phase of expansion.

The third chart offers a more detailed view of Bitcoin’s weekly trend, including an overlay of M2 money supply growth, which is another popular monetary metric. This view highlights how the Macro Trend Oscillator, when switched to a configuration Decode called “Bitcoin Mode,” fine-tunes its sensitivity to metrics that directly impact crypto markets. In this configuration, only a few of the full 17 metrics that best identify Bitcoin cycle tops are used.

As it stands, Bitcoin is still in the negative red histogram zone, even despite its rally in recent months. The first deep green histogram has yet to show up, not to mention the first light green bar that will mark the cycle peak. Based on this setup, the oscillator implies that Bitcoin still has a lot of room to run this cycle, and that a price top is unlikely to arrive in 2025.

At the time of writing, Bitcoin is trading at $103,300.

Featured image from Pixabay, chart from Tradingview.com

In the last two months, Bitcoin price has plunged by over 23% in a prolonged market correction. Significant portions of this decline have been attributed to a series of new US tariffs announced in February, March, and most recently April. 

Despite the short-term bearish effects of this macroeconomic development on the crypto market, popular crypto analyst Miles Deutscher theorizes that BTC could substantially benefit from the long-term effects of these policy decisions.

Short-Term Chaos, Long-Term Clarity: Bitcoin Tipped For New ATH

In a recent X post, Deutscher states that Bitcoin is on course for a new all-time high despite current market uncertainty. The analyst explains that while recent trade and economic policy changes by the administration of US President Donald Trump may be exerting a negative market effect, the ensuing sequence of events from these decisions can prove bullish. 

Firstly, Deutscher states that recent economic decisions by the US government show intentions to induce short-term pain that could weaken the dollar and interest rates which should be beneficial for Bitcoin and other crypto assets. 

However, the new import tariffs are likely going to discourage the purchase of US Treasury Bills forcing a reliance on domestic buyers which triggers liquidity tightening. As Bitcoin is sensitive to liquidity, the contraction of global liquidity will cause further price falls as investors move their funds to safer assets. 

Eventually, the crypto market is expected to bottom out pricing in recession fears. By the time an official recession is announced, the market could be stable and anticipate an economic response by the Federal Reserve.

At this junction,  the US Apex Bank is likely to announce a rate cut clearing the way for quantitative easing (QE). However, while this QE may not occur until 2026, Bitcoin will experience a dollar liquidity boost from other economic tools including repurchase agreements,  Bank Term Funding Program, and Treasury bill purchases. 

Following this development, Bitcoin is expected to embark on an upward trajectory. The “top quality” altcoins will potentially follow the market leader while other tokens with little to no utility shrink. Once Bitcoin nears or hits a peak price, the altseason will kick in. 

Deutscher explains it is currently difficult to predict the crypto market and US policies in the short term i.e. 1-12 weeks. However, his forecast is likely to roll out in the coming months placing Bitcoin in a strong position for a new all-time high between Q3 2025 and Q1 2026.

BTC Market Overview

At the time of writing, Bitcoin was trading at $83,313 following a 0.90% gain in the past week. However, the asset’s daily trading volume is down by 68.68% and is valued at $14.25 billion.

Featured image from The Conversation, chart from Tradingview