IIP Number For Sept 2012 At -0.4%

The Index of Industrial Production (IIP) data for the month of Sept 2012 month came in at -0.4% on a YoY basis, which was major shocker for the markets as the street expected it to be around 3%. As soon as the data was released, the markets turned from the green zone to the red zone. Further, the cumulative growth for the period of Apr-Sept 2012-13 stands at 0.1% over the corresponding period last year.

The IIP data encompasses three major industries – Mining, Manufacturing and Electricity, which account for 14.15%, 75.53% and 10.32% respectively. For Sept 2012, these industries saw a growth of 5.5%, -1.5% and 3.9% respectively on a YoY basis. The Capital Goods sector saw a huge decline in growth of 12.2% YoY, while Consumer Goods and Consumer Durables saw a marginal negative growth of 0.3% and 1.7% respectively.

Now, the question arises as to will the RBI look to growth in the immediate term? Well, we at Dalal Street Investment Journal believe that the apex bank would maintain its status quoist stance (unchanging the key repo rate) in its next meet in Dec 2012. Inflationary concerns are still hovering above the economy, and hence, it would not be appropriate for the RBI to go in for a rate cut. However, the bank has guided that the rates would be probably soften from the Mar 2013 quarter.

We believe that with the government putting an end to the policy paralysis since Sept this year, there is some sense of confidence on the streets. This, coupled with the festive season in the month of Oct, would probably bring the IIP number for Oct on a slightly positive note. However, one has to wait and watch on the same.

The Wholesale Price Index (WPI) inflation number for Oct 2012 is slated to come in on Wednesday, Nov 14. The impact of the data would be seen on Thursday's market trading session as the markets are closed on Tuesday (apart from Muhurat trading) and Wednesday on account of Diwali. The IIP data for Oct 2012, would be released on Dec 12, 2012.