Sunday, December 13, 2009

[Investors] IIP grows by 10.3%; albeit with low base effect

IIP grows by 10.3%; albeit with low base effect

The index of industrial production grew by 10.3% yoy for October 2009, albeit with a very low base effect. The growth was driven by a sharp 21% growth in consumer durables and 12.2% growth in capital goods. However, we believe the number was below expectations on two counts.

  • A slower growth pf 5% in production of basis goods compared to 6.6% in year till September 2009.
  • Slower growth of 3.5% in six core industries compared to 5.0% in year till September 2009.

We believe that these two indicators point towards the fact that most of the inventory restocking is almost over and to sustain such growth from here will be slightly difficult. In such scenario we do not expect the government to roll back the stimulus package any time soon. We also maintain our assumptions of a rate hike only in the end of Q4FY10 or may be in Q1FY11 as the growth in the economy is still not at alarming though the growth in the wholesale price index is inching higher consistently.

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The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
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