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Food inflation, erratic monsoon, contraction of exports are some of the reasons for this prediction

Indian equity markets sank in sloppy action last week with persistent selling by overseas investors, triggered by a spike in US bond yields and a rising US dollar index

The erratic monsoon, which is affecting sowing, and global developments will keep the food inflation at elevated levels and would also hit the demand in rural India owing to lower income and inflation, said CARE Ratings in a report.

CARE Ratings said the food inflation will maintain an elevated trajectory in the coming months, gradually receding by October in conjunction with the influx of fresh harvest into the market. The risk to global food prices remains elevated with recent weather-related disruptions in South Asian countries and geopolitical developments.

Erratic monsoon rains in India have delayed vegetable planting and damaged ripening crops, raising vegetable prices to a seven-month high in June. Traders expect costs will remain high until October due to supply shortages. Costlier staples such as onions, beans, carrots, ginger, chillies, and tomatoes are expected to stoke retail inflation, which could hit a seven-month high in July, lowering the potential for the Reserve Bank of India to lower rates this year.