Inflation Will Fall. Add These 5 Stocks to Your Watchlist

livemint.com:

inflation in India may be close to a peak. A few weeks ago, retail inflation, i.e. the price rise impacting household budgets, hit a 15-month high of 7.44%.

There is no doubt that rising prices of almost everything is hurting the Indian consumer. There’s also no doubt that inflation will stay high in the short term. This is due to the demand driven by spending during the festival season.

But what if we look beyond the next few months? Is inflation likely to stay high all throughout 2024? Chances are good that the opposite will happen. There is an old saying in the commodity market – ‘The cure for high prices is high prices’. In other words, the problem of inflation will solve itself.

The reason for this is simple. When prices rise, people notice the impact it has on their wallets. This may not be a big problem immediately, but as the months pass, more and more people feel the pinch.

And one by one, they start cutting down on consumption. There’s no rocket science here. It’s economics 101.

First, the poorer sections of society cut back on spending. Then the middle class and then the wealthy. In India right now, the poor and middle class have already cut back.

Sure, there will be some discretionary spending during the holiday season over the next few months. However, expecting the middle class to play the lead role in driving the Indian economy in 2024 is asking for too much. That leaves only the wealthy who will be in any position to spend enough money to meaningfully drive economic growth next year.

But this is a small segment of the population and won’t move the needle on inflation too much. Then, there are global factors that will keep a lid on inflation. Most of the developed world will likely be in a recession or