IIP: Performance on Sector-wise classification

In terms of sector-wise classification, the Mining sector reported a 3.5% de-growth as against a 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. This was coupled with continued pressure from crude oil and natural gas production. We continue to believe that the sector is likely to gain traction to some extent going forward owing to the expected rise in production on partial re-opening of mines in Karnataka and also due to a low base effect.

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. The steep decline in production of industry groups such as 'Furniture; manufacturing n.e.c.', 'Office, accounting & computing machinery' and 'Radio, TV and communication equipment & apparatus' contributed to the drag on the manufacturing sector. The segment 'Electrical machinery & apparatus n.e.c.' reported a robust 34.2% growth and also contributed to growth in the capital goods segment.

After having supported the overall index for 3 straight months, the Electricity sector reported a modest 1.3% growth in October 2013 as compared to 12.9% in the previous month and 5.5% in October 2012. The deceleration is largely on account of contraction in thermal electricity generation. For November 2013, electricity production is likely to report a moderate improvement owing to an increase in thermal generation as well as support from a low base in the corresponding month of the previous year.

IIP: Performance in the Use-based category

In terms of use-based classification during October 2013, Consumer goods production weighed on the overall index by reporting decline of 5.1% as compared to a healthy 13.8% growth in the corresponding month of the previous year. This weakness can be attributed to the steep contraction in consumer durables production (12.0% de-growth) as it declined for the eleventh straight month. Even with a relatively lower weightage, it dragged the overall index by 200bp. Its performance reflects the sluggishness in the demand environment as growth has slowed amidst high retail inflation.

Growth in Capital goods came in positively at 2.3% as compared to 7.0% in October 2012 and de-growth in the preceding 2 months mainly because the volatile component 'Cable, Rubber Insulated' reported an expansion in production of 143.1%.

Source : Equity Bulls

Keywords