India's Industrial Production bounces back to 2.4% in January 2013 - Microsec

After two straight months of contraction, India's Industrial Production growth rate bounced back to 2.4 percent YoY in January 2013. Industrial growth was -0.5 percent YoY in December 2012. Much of the upside in January print was contributed by a favorable base effect as Industrial output growth was 1.0 percent YoY during January 2012. On a segmental basis, the growth was contributed by the encouraging performance from Manufacturing and Electricity sector. Manufacturing sector reported 2.7 percent YoY growth during the month and Electricity production accelerated by 6.4 percent YoY, the highest in seven months. IIP growth for December 2012 has been revised marginally upwards to -0.5 percent YoY from -0.6 percent YoY reported earlier.

In value terms, the Index of Industrial Production (IIP) increased to 181.8 in January from a revised 179.4 in December 2012, registering a sequential growth of 1.3 percent. The cumulative growth for the period April-January FY2012-13 stood at 1.0 percent YoY against 3.4 percent YoY in the corresponding period of the previous year.

Outlook: Going forward, growth in Industrial activity is likely to remain subdued. However, we may see some recovery in FY2013-14 on account of monetary easing by Reserve Bank of India (RBI), improving macroeconomic sentiments (PMI Manufacturing increased to 54.2 in February 2013 from 53.2 in January 2013) and on the hope of further reforms by the Government. Along with that, low base of last year will actually give a turnaround in Industrial growth.

In light of the weakness in GDP number (4.5 percent YoY in Q3 of FY2012-13 and estimated 5.0 percent YoY for FY2012-13 by CSO) and the positive Inflationary trend, RBI's policy stance is likely to be more growth-supportive going forward. Thus, we expect a 25 basis points cut in the Repo rate in March 19, 2013, policy meeting.

Source : Equity Bulls

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