Low single-digit industrial growth in Dec '10 was mainly on account of the high base effect. The major drag came from Capital Goods, while Consumer Durables witnessed a bounce back. We maintain FY11e IIP growth at 7.1%.
n Lowest IIP growth in over 12 years. The index of industrial production (IIP) grew 1.6% in Dec '10, the lowest since Nov 1998. During Apr-Dec '10, IIP grew 8.6%, matching growth during the same period last year.
n Manufacturing and mining decelerates; electricity up. While growth in both Manufacturing (+1%) and Mining (+3.8%) considerably decelerated in Dec '10, Electricity (+6%) registered strong growth. Within the Manufacturing sector, industry groups such as jute & other vegetable-fiber textiles (except cotton) and metal products & parts (ex machinery and equipment) registered spectacular growth of 58.6% and 21% respectively.
n Deepest fall in Capital Goods in over 17 years. Capital Goods production in Dec '10 declined 13.7%, the biggest fall since Mar 1993. Excluding Capital Goods, the IIP grew 5.1% in Dec '10. Categories such as computer system & peripherals (-52.2%), agricultural implements (-49.6%), ship building & repair (-46.7%) and insulated cables (-42.5%) were a major drag for Capital Goods.
n Consumer Durables bounce back. While Consumer Durables (weight: 5.4%) saw a strong growth of 18.5% in Dec '10, from 4.4% in Nov '10, growth in consumer non-durables (weight: 23.3%) remained subdued (-1.1% in Dec '10). The decline in consumer non-durables was mainly owing to production of cigarettes, hair oil and rice bran oil declining 34.3%, 34.2% and 31.6% respectively.
n Industry performance. The bleak industrial growth in Dec '10 is mainly due to the high base, as the IIP growth in Dec '09 was 18%, the highest since Apr 1995. On an m-o-m basis, the IIP witnessed a spectacular growth of 10.3% in Dec '10. We expect IIP growth to remain subdued during Jan-Mar '11 due to unfavorable base effect. We maintain our IIP growth target for FY11e at 7.1%.
n Policy outlook. IIP growth would continue to be bleak in remaining-FY11. The IIP contributes ~20% to the GDP; thus, it will have some moderating impact on GDP growth. On the other hand, controlling the high & sticky inflation has become a serious challenge for the RBI. Hence, we expect RBI to maintain its tightening bias on the monetary policy with two rate hikes of 25bps each - one in the current quarter and another in the next.
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
From: harendra singh <harrypushp@yahoo.co.in>
To: Maverick <rajivhanda@yahoo.com>
Sent: Fri, February 11, 2011 2:34:42 PM
Subject: Hi Sir
| Sir, How are you ? Is the worst over for the market or still more left. Heard nothing from you since long. Regards, Harendra |
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