Industrial growth surprises positively - Angel Broking

IIP marginally positive: The Index of Industrial Production (IIP) reported 0.6% growth for the month of February 2013 decelerating from 2.4% in January 2013 and 4.3% in the corresponding month of the previous year. Marginal growth in the Index of Industrial Production (IIP) surprised positively though, considering that the consensus estimates pegged a de-growth, mainly as the eight core industries (37.9% weightage in the index) reported a 2.5% decline in growth for the month. On a cumulative basis, during the April - February period of FY2013, growth in industrial production, at 0.9%, indicates a low-level stabilization.

The IIP for November 2012 has been revised to report a 1.0% de-growth as against a lower 0.8% contraction estimated earlier.

Sector-wise classification: Performance of the manufacturing sector (2.2% growth) continued to support the IIP for a second consecutive month as the other sectors, ie mining and electricity, reported a decline. Within manufacturing, 13 of the 22 industries reported positive growth. The mining sector continued to remain in the negative territory for the fifth consecutive month and contracted by a steep 8.1% owing to dismal performance of coal, crude oil and natural gas production. Electricity production during the month declined by 3.2% as compared to the strong growth of 6.4% in the previous month and a growth of 8.0% during February 2012.

Use-based classification: The capital goods index posted a 9.5% growth, its highest level in the previous 12 months, and contributed considerably to the overall growth print of 0.6%. It comes as a surprise, largely since the index clocked a 9.3% decline in the April - January period of FY2013. Excluding the volatile capital goods sector, overall IIP performance has declined by 0.7%.

Consumer goods production reported a weak 0.5% growth, owing to support from consumer non-durables for the second consecutive month. Growth in consumer non-durables decelerated to 2.9% as compared to 5.3% in the previous month and consumer durables contracted further by 2.7% as compared to a 0.8% contraction in the previous month.

CPI inflation moderates slightly but remains in double-digits: The combined (rural + urban) Consumer Price Index (CPI) inflation for March 2013 moderated somewhat, at least pausing the trend of an uptick seen in the past five months. It stood at 10.4% in March 2013, slightly below the 10.9% rise reported in the previous month.

Policy stance: The Reserve Bank of India (RBI) in its recent mid-quarter review made it amply clear that the headroom to ease monetary policy remains ‘quite limited'. Also, we believe that the recent data points, ie an elevated current account deficit and double-digit CPI inflation (although moderating), are unlikely to warrant a dovish tone by the central bank. We would be watchful of the WPI inflation figure, due to be released on Monday, to determine the RBI's policy stance on any rate cuts in its annual policy statement on May 3, 2013.

Source : Equity Bulls

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