May 2022 has been an eventful month with the Reserve Bank of India (RBI) surprisingly increasing the benchmark repurchase rate (repo) by 40bps. The financial markets were quick to react to the RBI action. The 10-year benchmark 6.54%-2032 bond yield rose 26 bps to 7.3783% on the day of the rate hike. The stock market, still reeling under the rate hike, was jolted again when data showed consumer-price inflation accelerated at the fastest pace since 2014. Retail inflation jumped to 8-year high of 7.79% in April weakening the financial markets. By 13th May, the Nifty 50 fell to 15782, or 13% lower from its close on 4th April.
The worst may not be over yet If experts are to be believed because the latest inflation print doesn’t factor the impact of high commodity prices. Inflation is now the top priority for central banks world over. As for the investors, rising inflation resulting in falling purchasing power is now the fulcrum of investment strategy recalibration.