IIP robust but partially loses momentum: Angel Broking

Views of Mr. Jaikishan J Parmar (Research Analyst, Angel Broking):

"The Index of industrial production (IIP) for the month of February 2018 grew by 7.1% on a YOY basis. Among the 3 key sectoral components of IIP, mining posted negative growth of (-0.3%) while electricity grew at 4.5%. The positive surprise continued to come from manufacturing which showed 8.7% growth in the month of February. Interestingly, the IIP mix is a lot more broad-based this time around with 15 out of the 23 industry groups showing positive growth in IIP.

Over the last 2 months, the user based classification for capital goods and infrastructure have been showing green shoots of a recovery. As per user based classification, capital goods showed a growth of 20% while infrastructure goods showed a growth of 12.7%. This can be clearly construed as an indicator that there are green shoots of recovery in the capital goods cycle and that could have positive ramifications going ahead.

The product categories that contributed on the positive side include stainless steel, sugar, cement, diesel and centrifuges. On the negative side, the de-growth was seen in product categories like gold jewelry, chemicals, plastic components and telephones.

With the IIP continuing to be comfortable at 7.1% and manufacturing robust at 8.7%, the RBI may not have too many reasons to cut interest rates to spur growth. That stand was already reflected in the March monetary policy."

Source : Equity Bulls

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