Posts tagged iip

August IIP plunges to 5.6%

The IIP figures plunged down to 5.6% and recorded one of the worst figures in the past one year with the exception of June’10 where it recorded a similar growth. It registered a growth of 10.4% on a y-o-y basis. The released data was very poor compared to the market expectations and half of Reuters’ median forecast of 9.65%. It was also less than the previous month’s figure which was revised upwards to 15.2%. The low overall growth rates are very shocking to the analysts, as most had expected it to rise or remain at similar levels given the statistical high base of 2009 besides, the industry showing signs of acceleration in the previous month. However, these statistics are likely to be affected by the monsoon effect, as industrial production is likely to decelerate during monsoons, which showed an extended period of stay this year and affected cropping patterns in the country

  • Moderate rate of growth at 3.7% compared to 3.9% in July in core sectors, consisting of crude oil, petroleum refinery products, coal, electricity, cement and finished steel can also be accounted for the low rate of growth rate of industrial production

 

  • The index was also dragged down by the deceleration in the manufacturing sector and especially in the capital goods segment as there was feeble demand from the industries and the factories for the machinery and related equipments

 

  • The less than expected data, weak demand and double-digit inflation have all put the central bank in severe dilemma whether the policy of further monetary tightening should be pursued or not

 

  • The mining sector growth rates fell, only to grow at 7% compared to the growth of 11% in the July’10. Electricity sector grew at an abysmally low rate of 1% compared from the last month’s 10%. They grew at 12.9% and 10.6% in the corresponding period of the last year respectively

 

  • The manufacturing sector growth rate fell to 5.9% from a robust 10.6% in the last month. This is a very depressing news for the sector as previously it managed to show signs of tremendous growth and registered almost a double digit growth last month only

 

  • In the use-based category the basic goods, capital goods and the intermediate goods sector registered a growth of 3.7%, -2.6% and 10% y-o-y respectively compared to 7.7%, 9.2% and 14.4% y-o-y respectively in the last month. All the three sectors have decelerated but, it is the capital goods sector which has been hit the worst, due to lack of demand in this segment

 

  • The consumer goods sector has shown a rather gloomy performance on an overall basis driven only by the growth in the durables sector which grew at a rate of 26.5% compared to last month’s 24.5%, on back of surge in auto sales and increased demand in the other durable goods. The concern in this sector is non-durables good which registered rate of growth at -1.2% compared to last month’s 6.1% and signifies lack of demand in the rural areas

 

Author:Rahul Sonthalia, Research head, Kredent

Industrial porduction @ 13.8% beats market expectations

 The IIP rose 13.8%, at the fastest pace since April compared to the previous month’s growth of 5.76% (revised). The production index registered a growth of 7.2% on a y-o-y basis. The released figure was much above the market expectations and nearly double the analyst’s forecast of 7.7% and also higher than the previous month’s number which was revised downwards. The strong overall growth came as a surprise to the analysts, as most had expected it to slide given the statistical high base of 2009 besides, the industry showing signs of deceleration in the previous two months

  • The index was boosted by the growth in the manufacturing sector and especially in the capital goods segment as there was huge demand from the industries and the factories for the machinery and related equipments
  • According to Finance Minister Pranab Mukherjee, domestic demand seems to be strong and the country is likely to achieve a 8.5% of GDP growth in FY2011
  • The better than expected data, strong demand and double-digit inflation have all strengthened the case for further monetary tightening by the central bank at the mid-quarter monetary policy review on 16th of September
  • The mining sector did not show any major change and continued to grow at moderate pace of 9.7% compared to the growth of 9.5% in the Jun’10. Electricity sector grew at 3.7% marginally improving from the last month’s 3.5% but still maintaining its weak growth. The mining and the electricity grew at 8.74% and 4.21% in the corresponding period of the last year
  • The manufacturing sector jumped to 15% from 7.3% in the last month. After almost giving threats of a downtrend last month, the sector managed to show signs of tremendous growth and almost register a double digit growth
  • In the use-based category the basic goods, capital goods and the intermediate goods sector registered a growth of 5.1%, 63% and 15% y-o-y respectively compared to 3.4%, 9.7% and 9.7% y-o-y respectively in the last month. All the three sectors have moderated but, it is the capital goods sector which has walked away with all the glory and growth
  • The consumer goods sector has shown a muted performance on an overall basis driven only by the growth in the durables sector which grew at a rate of 22.1% on back of surge in auto sales and increased demand in the other durable goods. The concern in this sector is non-durables good which is lagging behind each month and signifies lack of demand in the rural areas

IIP July Sectorwise composition

 

Author:Rahul Sonthalia, Research Head,Kredent

Industrial Production rises 7.1% in June’2010

 

The IIP expanded at 7.1%, the slowest pace in 13 months compared to the previous month’s growth of 11.35% (revised). The production index registered a growth of 8.3% on a y-o-y basis

  • The IIP was almost in line with the expectations. The market was neutral to the data release and the benchmark equity indices closed flat while the bond yields across various maturities softened

 

  • Only 13 out of 17 manufacturing sub-groups could manage a positive growth in June compared to the growth in 15 sectors last month. The index has also been revised downwards for the last month signalling a slowdown in the IIP growth

 

  • The slowdown in the production has been mainly due to moderation in capital goods production which has shown a huge correction. The data also suggest that the divergence between the capital and consumer goods might narrow down as the demand for consumer durables is picking up.

 

  • As already pointed in the report before the manufacturing production has slowed down and would moderate further because the capacity limit has already been reached and the global demand is also slowing down amid the economic uncertainty

 

  • The mining sector did not show much of drastic change and cooled down to 9.5% from 10.1% in May’10 on a mom basis while the electricity sector gave a drastic performance falling from 6.4% to 3.5% in Jun’10. Both the mining and the electricity sector are approaching towards a downward trend after peaking in Apr’10

 

  • The manufacturing sector slowed down to 7.3% in Jun’10 from 12% in the last month. After giving its best performance in Apr’10, recording a growth of 13.4% the sector has slowed down and has again came back to single-digit growth after almost about 11 months signalling a downward trend

 

  • In the use-based category the basic goods, capital goods and the intermediate goods sector registered a growth of 3.4%, 9.7% and 8.7% y-o-y respectively compared to 8.2%, 34.2% and 10.1% y-o-y respectively in the last month. All the three sectors have moderated but, it is the capital goods sector which shown one of the weakest performance

 

  • The consumer goods sector has shown a muted performance on an overall basis registering a growth of 8.3% compared to its previous month’s growth of 7.4%. Again it is the consumer durables good in this segment which like usual has given a good show increasing by 27.4% due to increased demand of durables among the masses. The non-durable section has only managed to grow by 1.3% compared to a growth of 1.4% in the last month

 

Authro:Rahul Sonthalia, Research Head, Kredent

Weekly equity update June 5, 2010

Dear readers, we have been publishing weekly review of major market movement to enable our readers to take better investing decisions. I hope these reviews are informative.

Markets gained for a second consecutive week to reach 17,117 on Friday, rising 1.5% over the last week. The week saw a lot of good news for the markets. In the beginning of the week, better than anticipated GDP data set the bullish tone. But on Tuesday, week Chinese industrial production combined with negative global cues pushed the markets to the extent of 372 points or 2.2%. However, post that, positive global cues, good auto and cement numbers kept the mood upbeat in the market for the rest of the week. Sensex touched 17,000 mark on Thursday, first time since May 18. The BSE auto index jumped 4.4% to 7,894, it was followed by FMCG, PSU and healthcare. Fact that monsoon reached the coast earlier also added to positive sentiments.

Markets should open weak under the influence of weaker than expected US Employment numbers and weak closing of US markets on Friday. For next week, key events to watch out will be the meeting of empowered group of ministers (EGoM) on Monday, 7 June 2010 regarding the decontrolling of oil prices. Also IIP data for the month of April will be released which is keenly watched. 

Author:Praveen Bajaj

March IIP Update

  • The IIP registered a growth of 13.5% for the month of March’10. The same index registered a growth of 2.3% y-o-y in Mar’09 and a growth of 15.1% in the month of Feb’10
  • The IIP figure once again registered a growth below the street expectation of 15.1%, weighed down by a partial withdrawal of stimulus measures ad a rate-hike. But still, the IIP figure has registered a double digit growth for the sixth consecutive month driven by low base year effect and astounding performance of the manufacturing sector
  • The central bank is not expected to tighten the monetary policy so soon as it is going to wait for further cues on inflationary pressures and demand in the economy. The overall economic situation in the coming days will give a further insight and help both the government and the RBI to take the appropriate decision on the interest-rate hike
  • The mining sector leaped ahead with a big jump from 0.4% in Mar’09 to 11.0% in Mar’10 on a yoy basis while the electricity sector showed improvement from 6.3% to 7.7% in Mar’10. The mining and the electricity sector showed a growth of 12.2% and 6.7% in the last month respectively
  • The manufacturing sector grew by 14.3% y-o-y compared to -3.3% in Mar’09 y-o-y. It has been in an uptrend since few months and has also been one of the factors in helping the IIP soar. It registered a growth of 16.0% in the last month
  • In the use-based category the basic goods, capital goods and the intermediate goods sector registered a growth of 10.1%, 27.4% and12.7% y-o-y respectively compared to 1.4%, -8.2% and -4.4% y-o-y respectively in Mar’09. These sectors have performed moderately on a mom basis except the capital goods sector which reduced by almost 50%
  • The consumer goods sector has one again given a good performance registering a growth of 10.6% yo- y compared to its growth by -0.8% in Mar’09 y-o-y. The sector’s growth got injected by a boost in the consumer durables segment which grew by 32.0% y-o-y, a huge increase from 8.3% in Mar’09 y-o-y. The consumer non-durable goods too performed well registering a growth of 3.3% compared to a growth of -3.6% in Mar’09

    • RBI Monetary Policy 2010

    Monetary Policy Predictions

    Finally the D-day is here..the day when RBI Governor Dr.D Subbarao will announce the monetary policy putting (or rather saying probably putting) an end to the much speculated move of RBI..will it hike the rates, which rate will be hiked and how much..before RBI announces the rates here is MoneyBol’s take on the same…

    Inflation

    As known to all, inflation is the biggest concern for RBI. In our  Inflation WPI March 2010 update a few days back, we saw that the inflation rate, has already crossed RBI’s target of 8.5%, The YoY inflation number of 9.9% for March 2010 is much higher compared to 1.2% observed a year earlier. The food articles have risen 16.65% since March 2009. The manufactured products too have sharply risen by 7.13% since March as compared to 2.29% observed a year earlier. Measures to alleviate pressures from excess liquidity that may exacerbate inflationary concerns have been taken by the Central Bank earlier. Liquidity had been curtailed via a CRR hike of 75 bps in the January Policy.

    Mr. C.Rangarajan, Chairman, Prime Minister’s Economic Advisory Council (PMEAC) remarked “The RBI may want to wait for a few weeks to see if food prices will decline on account of the rabi output. Then it might want to tighten liquidity and if inflation still persists, then it will act on policy rates”

    Going forward, inflationary concerns are expected to subside slowly with forecasts of normal monsoons, better crop production, good performance of manufacturing sector and lagged effect of monetary policy changes. On the upside risk of rising crude oil prices remain which could trigger inflation again.

    Industrial Production

    IIP is still growing at double digits and poses good for the economic growth of the country. However in the last month’s release, it seems that IIP seems to be moderating. As stimulus measures are wound up, IIP growth will be mainly driven by domestic demand. Thus in the coming days, IIP may not be able to post the god growth that has been observed post June 2009. A moderation in IIP growth may prevent RBI from taking aggressive measures.

    Liquidity

    Since the last 75 bps hike in CRR in February, liquidity has come down from the highs of +100,000 cr mark seen in January, but liquidity exists in the system to the extent of Rs 50,000-Rs 60,000 cr. RBI may want to retain some liquidity in the system in order to carry out the G-Sec auctions process smoothly, but on the flip side it will also not like the liquidity to fan inflation. Thus it would like to get rid of some liquidity from the system.

    Conclusion

    These are some of the most important considerations that will dictate RBI’s decision. A 25 bps hike in all the rates viz Repo, reverse repo and CRR. It is also expected that it may hike the rate by 50 bps. A 25 bps hike in CRR removes about Rs 12,000 cr of liquidity from the system. Considering this, I think that RBI may hike the CRR by 25 bps only and wait for hiking it by another 25 bps for some time. Regarding, repo and reverse repo rates, with RBI’s mid policy hike in March, it has given strong signal of a tightening stance. It will continue with the same. But at the same time, it will not like to derail the growth process by indulging in aggressive rate hikes. A 50 bps hike after the 25 bps hike in March, may pose threat to the nascent growth prospects. Recent developments have given early signals of a moderating inflation, thus RBI may hike the policy rates by 25 bps only instead of 50 bps and prefer to resort to mid policy hike for any further increases in the rates.

    Author name: Praveen Bajaj, MBA (SCMHRD)

    India Inflation : WPI March 2010

    • The WPI for the month of January stood at 9.90% against 1.20% in the corresponding month of the last year. The same figure posted 9.89% in the previous month. The figure released was below market expectationswhich was pegged at around 10.37%
    • The figure registered increased at the fastest pace in 17 months, driven by higher food and fuel prices. The market was hardly moved by the figure and continued falling instead of rising as the inflation figure posted was below expectation.
    • Acc. to the Finance Minister Pranab Mukherjee, the numbers were on expected terms as they were expecting a double-digit figure. The RBI had already raised the interest-rates to curb the inflation and is expected to do so once again in the monetary policy in April’10.

    Inflation Internals

    • The sub-group of primary articles rose by 14.10% y-o-y against 5.21% in Mar’09.It surged high due to jump in the food articles inflation by 16.65% on a yoy basis but it declined by 0.5% on a mom basis due to lower prices of cereals, fish-inland fruits & vegetables and tea. However, prices of stuffs like poultry chicken, pork, milk, jowar, barley and coffee moved up.
    • In the same sub-group, the non-food articles decreased by 0.82% m-o-m but increased 12.77% on a yoy basis. The monthly decline was because of lower prices of vegetable seeds, soybean, copra, raw silk and tobacco. The index for minerals rose by 9.79% y-o-y which was due to higher prices of barites, steatite, chromite iron-ore and asbestos
    • The second sub-group of fuel, power, lights and lubricants increased by 6.9% y-o-y from -6.0% in Mar’10. It registered a growth of 0.28% m-o-m due to higher prices of petrol, light diesel oil, aviation turbine fuel and furnace oil
    • The third sub-group of manufactured products registered an increase of 7.13% y-o-y from 2.29% in Mar’10. It registered a growth of 0.28% m-o-m mainly because of huge increase in the prices of food-products, sugar and rubber & plastic products. Prices of commodities like cotton textiles, man-made textiles and chemical products too moved in upward direction while wood products, paper products declined.
    • Food products declined by 1.15% m-o-m due to decline in the prices of edible food products. Sugar declined by 3.73% while there was a decrease of 0.96% in edible oils. Man-made textiles surged by 0.4% due to increase in the yarn and fibre prices Iron & steel decelerated by 0.31% m-o-m

    I believe that the current WPI levels are way beyond the comfort zone of the Reserve Bank of India and a hike in the key rates (repo rate, reverse repo rate) in the April 20 monetary policy review is almost certain. This is also because of the fact that the growth in IIP and the profitability of India Inc. is also back on track, thus leaves ample room for RBI to hike the key rates by at least 50 bps without hindering the growth process.

    Author name:Rahul Sonthalia, Research Head, Kredent

    IIP Data for January 2010

    The IIP figure for Jan’10 grew at 16.7% compared to -0.5% in Jan’09 on a y-o-y basis. The same index
    registered a growth of 17.6% (revised) in the last month yoy. The figure was not surprising as it was in
    line with the market’s expectation
    • In terms of industries as many as 14 out of 17 industries have shown positive growth during the monthof Jan’10. The government is unlikely to hike the interest-rate before the policy review in April’10, afterRBI deputy governor said that it was premature to take any mid-term policy action
    • The IIP numbers are expected to continue flowing in double-digits on a yoy basis for several moremonths given the base effect and strong Purchasing Manager’s Index number. According to a survey,the business activities among Indian service companies grew at its fastest pace in 17 months inFebruary, climbing for the third straight month as both output and new orders increased
    • The mining sector showed a huge jump from 9.5% in Dec’09 to 14.6% in Jan’10. It registered a growthof -0.4% in Jan’09 y-o-y. The performance has tremendously improved in this segment giving a surge inthe overall IIP growth. This robust growth has come after a long gap since August’09
    • The manufacturing sector grew by 17.9% in Jan’10 compared to 18.5% in the last month on a y-o-ybasis. This sector has been consistently showing improvement and has registered growth in doubledigits since last 5-6 months. It registered a growth of -0.8% in Jan’09
    • The electricity sector registered a growth of 5.6% in Jan’10 y-o-y compared to 5.4% in Jan’09 y-o-y. Ithas continued its uprising trend since last few months and had registered an increase of 1.8% in thecorresponding month of the last year
    • In the use-based category the basic goods, capital goods and the intermediate goods sector registereda growth of 10.7%, 56.2% and 21.3% y-o-y respectively compared to -1.0%, 15.4%, -9.2% y-o-yrespectively in Jan’09. All the three sectors have performed extremely well; especially the capital goodswhich has showed a huge improvement due to rise in demand of industrial equipments by the industries
    • The consumer goods sector has shown a decline and grew by 4.2% y-o-y compared to its growth by12% in Dec’09 y-o-y. The reason for this was the decline in the growth of consumer durables whichgrew by 31.6% compared to 46.0% in Dec’09. There was a decrease in the demand for the goods dueto soaring inflation which led to an increase in the price of the goods. The non-durable goods on theother hand rose by -3.1% which was less compared to the last month’s growth of 3.7%

    Author: Rahul Sonthalia, Analyst, Kredent Group