IIP numbers may dampen markets' sentiment during the week

Industrial output for the month of November 2015 contracted by 3.2 per cent, recording lowest for FY16. This can be attributed to poor performance by the manufacturing sector and dip in the output of capital. The IIP showed growth of 5.2 per cent in November 2014.

Manufacturing sector, which has a weightage of 75.52 per cent in the index of industrial production (IIP), registered a decline of 4.4 per cent over growth of 4.7 per cent in last November. Even, the production of capital goods declined by 24.4 per cent in November as against a growth of 7 per cent in corresponding month of last year.

Electricity generation in November 2015 reported a flat growth of 0.7 per cent as against 10 per cent in November 2014. Mining sector reported a growth of 2.3 per cent compared to 4.0 per cent in the same month last year.

However, surprisingly, sharp growth has been seen in consumer durables goods at 12.5 per cent in November 2015 as against (-) 14.5 per cent in November 2014. This was mainly been due to growth in radio, TV, communication equipments and furniture. While on the consumer non-durables side, there is negative growth of 4.7 per cent against 7 per cent in November 2014.

Cumulative industrial production during April-November stood at 3.9 per cent compared to 2.5 per cent in the corresponding period of last fiscal, according to the data released by MOSPI.

The slowdown in global economy is already hitting the Indian exports and for 12th straight month till November export are contracting.

Inflation measured by the Consumer Price Index (CPI) quickened to a fifth straight month high of 5.61 per cent in December from 5.41 per cent in November 2015 due to high food inflation. Food inflation inching up to 6.4 per cent in December 2015 and has hit a nine month high as against 4.28 per cent in the corresponding period of the last year. Food inflation constitutes of 46 per cent of the CPI basket.

Going forward, we don’t see any sign of recovery and factory production may remain under pressure in the forthcoming months. We believe, it will also be difficult for RBI to cut the interest rate further to boost industrial output despite the lower growth rate as retail inflation is inching up.