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Market Commentary
IIP and CPI Inflation disappoint - Angel Broking
Posted On : 2013-12-15 09:44:29( TIMEZONE : IST )
As per Quick Estimates on the Index of Industrial Production (IIP), industrial growth in October 2013 reported contraction of 1.8% as compared to growth of 2.0% in the previous month and 8.4% in October 2012. The industrial production for October 2013 surprised negatively by coming in lower than market expectations of a 1.2% decline.
In terms of sector-wise classification, the Mining sector reported 3.5% de-growth as against 3.3% growth in September 2013 and decline of 0.2% in October 2012 mainly due to the contraction in coal production during the month along with continued pressure from crude oil and natural gas production. The Manufacturing sector reported a 2.0% decline during the month on the back of a high base of 9.9% expansion in October 2012. After having supported the overall index for 3 straight months, the Electricity sector reported modest 1.3% growth as compared to 12.9% in the previous month and 5.5% in October 2012 mainly on account of contraction in thermal generation. For November 2013 electricity production is likely to report a moderate improvement owing to a low base in the previous year and recovery in thermal generation.
As per the use-based classification, Capital Goods index posted a modest growth of 2.3% as compared to 7.0% in the corresponding month of the previous year. Consumer durables contracted (for the eleventh straight month) by 12%, weighing on overall production by about 200bps and this reflects continued weakness in the demand environment.
The combined (rural + urban) Consumer Price Index (CPI) inflation during November 2013 come in at 11.2% as compared to 10.2% in October 2013 and 9.9% in November 2012. The inflation in food articles (accounting for almost 50% weightage in the index) edged higher to 14.7% as against 12.3% in the previous month. Fuel inflation continued to remain at 7.0%. Core CPI inflation also continued to remain sticky at 8.0%-levels. We expect that with containing of inflationary pressures and expectations as its priority, the RBI is likely to hike the repo rate by 25bp during its upcoming monetary policy review on December 18.
