Wholesale Price Index (WPI)
Wholesale Price Index is another important indicator to examine Inflation or deflation. The WPI indicates the current prices of wholesale goods sold by wholesalers across the country.
Unlike CPI, In WPI we measure the Current prices of goods with base year, to show the effect of inflation on purchasing power.
A higher than expected reading should be taken as positive or bullish for the Currency of a particular country. Lower than expected reading is negative or bearish for the currency.
E.g. Wholesale Price Index (WPI) of India is higher than the expected, is bullish for India stock market and Currency or vice versa
Note: – You can’t see the direct impact of WPI data on Equity, Commodity or Forex market. It shows an indirect impact.
Indicators That Impact India Stock Market
Wholesale Price Index (WPI) Vs Inflation
There are many methods to calculate the inflation but the Wholesale Price Index is the most important method used to measure it. The other methods used for calculating inflation include Gross Domestic Product Deflator, Cost-of-living indices, Producer price indices (PPIs), Commodity price indices and Core price indices.
The Wholesale Price Index measures the inflation of wholesale items sold by wholesalers across the country.
In simple word you can say that WPI is one of the basic and important tools to measure Inflation.
Wholesale Price Index (WPI) Vs Sensex
Increase in WPI data indicates that Inflation will increase. As a result, the price of Wholesale item will increase. It also increases spending and reduces the saving of people each month. At that time the consumer cuts back spending because basic expenses are too high, a recession usually follows. It means lower earnings for public companies and lower prices for their stocks. Ultimately this will show a negative impact on the stock market (SENSEX)
On the other hand decrease in WPI data indicates that Inflation will ease. As a result, the price of the daily household item will fall. It decreases spending and increases the saving of people each month. It means higher earnings for public companies and higher prices for their stocks. Ultimately this will show a positive impact on the stock market (SENSEX).
