ECOSOPE: Dec-10 IIP growth at 1.6%; industrial slowdown evident; FY11 estimate cut to 7.5%

Dec-10 IIP growth at 1.6% (MOSL estimate 3.9%, street 2.0%) corroborated the slowdown in industrial activity. YTD growth, perhaps a better gauge of industrial activity, slowed down to 8.9% from 9.8% a month earlier. An increase in macroeconomic risks and heightened uncertainties in the investment climate are the plausible reasons for industrial slowdown. We have revised our FY11 IIP growth estimate to 7.5% (from 8.9% earlier) and place our initial FY12 estimate at 6.1%.



Two major sectors constituting the IIP, viz. mining (3.8% vs 7.4% in Nov-10) and manufacturing (1.0% vs 3.2% in Nov-10) displayed marked deceleration. However, electricity (6.0% vs 4.6% in Nov-10) bucked the trend. Interestingly, 12 out of 17 industries within manufacturing group registered positive growth in Dec-10 in contrast with only 9 out of 17 in Nov-10. The industries that have come into positive territory are (i) food products, (ii) jute and other fiber textiles, (iii) rubber, plastic, petroleum and coal products, and (iv) metal products and parts except machinery and equipment. However, the industry group "Machinery & equipment other than transport" has slipped into the negative territory.

Source : Equity Bulls

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