The Index of Industrial Production (IIP) for April 2012 has come in at 0.12% which is weak but stronger than March’s negative –3.47% (which has been revised to –3.15%)
Manufacturing rebounded up to 0.06% while Electricity showed some strength at 4.6%. Mining, though, seems to have lost some steam.
This data isn’t very reliable, and I would only take it with a pinch of salt. However the slowing down trend is fairly clear even with other data.
The use based indexes:
This seems to only be a pause of some sort, while the downtrend resumes.
Takeaways:
- Growth has slowed. Markets have reacted sharply upwards in expectation of a rate cut, but I think that is only going to happen if inflation comes in at less than 8%.
- RBI is likely to cut rates because the government is doing nothing to assuage fears on the growth end. The potential thought process is – if we don’t cut rates, the government will blame us.
- Looking at the production slowdown in basic and intermediate goods, there is no immediate recovery in sectors like infrastructure, power or electricals. So I’d avoid players like L&T, BHEL, TataPower and so on.
- Consumer goods still shows strength, so FMCG companies and car manufacturers are likely to do well for a while.
