september IIP nos - my take .....

we are currently in the midst of re-surrection of the economy after a terrible 6/9 month period. i think in such a stage YOY comparison is rather futile and serves no purpose. at times it gives a distorted view of the scenario due to low base effect.

what i will like to do in MOM comparison. i will be very happy to see consistent uptick on MOM basis without too much zigzag or volatility in all the components that make the IIP nos.

if we analyse the nos on MOM basis what stands out is consistent performance of consumer durable sector since JAN 2009. it can not be just co-incidence that this period matches with the huge payouts made to the govt employees by way of 6th pay commission arrears.

contd....

first instalment was paid in feb / march and second / final instalment was paid in sept 2009. this money in hands of millions of employees has boomed into demand for all kinds of white goods and small cars / two wheelers etc. this effect should wane in the next two / three months time.

6th pay commission has also put some additional money in the housewife's purse by way of monthly increase in salaries. but somehow consumer non durables are not doing so well. infact we hv seen sectoral downticks in aug and sept IIP nos. this shud get reflected in FMCG nos in dec qtr. the reason could be draught in many parts of the country.

capital goods sector normally does very well in sept and march and in dec to lesser extent. this is due to depreciation policy. but normally apr/ may and oct / nov is disater. but this is a sectoral problem not limited to any one company etc. since we hv seen bumper nos in sept 2009 ( better than march 2009 ) we hv to see how big the downtickin oct / nov.

basic goods had an uptick in aug and downtick again in september. but overall performance over last 6 months is just average. it wl remain like that in next quarter as well.

intermediate goods gave a downtick in september but overall performance over 6 month period is encouraging.

on the whole, we r bound to see a downtick in october on MOM basis while we will see a 10 %+ performance on YOY basis. i will be happy as long as we hv atleast 1 % more than aug value but it looks difficult ..... unless basic goods pick-up in a big way.....

PSU divestment .....

PSU divestment

now govt has changed the course ...... the proceeds will be used to fund social benefits of capital nature instead of putting them in NIF ...... what it actually means some revenue deficit will be made good by these sale proceeds ....

effect ... it reduces pressure on govt to make some excise changes which wud hv otherwise become necesary ....... that is why u wl see auto stocks running particularly ..... but these changes will happen ... to a lesser extent in feb budget ... - nov schedule of changes will be scrapped ........ the auto stocks still continue to be overvalued .....

PSU DIVESTMENT - to fund revenue deficit ......

is it like selling family silver to fund daytoday expenses ..... yes and no .... if it is done to support draught relief or drinking water projects etc .... where the benefit is trickling to the poorest of poor ..... the cause is justified ...

if it is only used to cover revenue deficit which will happen due to reduced excise ...... then it is not at all justified as the corporates dont need that kind of support now - as can be seen the results of last two quarters ...... govt has passed an enabling resolution .... now it remains to be seen how the proceeds are actually utilised ........