May industrial output seen up 16 pct y/y

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REUTERS FORECAST: Industrial output is forecast to grow 16 percent in May from a year earlier, lower than an annual growth of 17.6 percent in April, the median forecast of 22 economists shows. Forecasts ranged from a rise of 13.5 percent to 20 percent.

FACTORS TO WATCH: Like the previous month, healthy manufacturing aided by robust domestic consumer demand, rebounding exports, higher infrastructure spending and private investments are expected to support factory output.

A statistical low base a year ago is likely to help production expand at a double-digit rate for the eighth straight month.

MARKET IMPACT: The Reserve Bank of India (RBI) is widely expected to raise rates by another 25 basis points at its monetary policy review on July 27, after it surprised markets last Friday by raising policy rates by a quarter point.

Even if the output data is weaker than expected it is unlikely to change the monetary stance of the central bank, which is more concerned about battling inflation that is likely to have hit 11 percent in June.

The wholesale price inflation for June will be released on July 14.

The yield on the benchmark 10-year bond climbed to a near two-week high of 7.65 percent after Friday's surprise rate rise, but has since eased about 5 basis points on hopes for improving cash conditions.

The most actively traded one-year swap touched 5.72 percent on Tuesday, its highest since Nov. 18, 2008, before coming down to 5.65 percent, Thomson Reuters data showed.

(Reporting by Rajesh Kumar Singh; Additional reporting by Mumbai Treasury Team; Editing by Ranjit Gangadharan)

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