IIP nos - October 2009 - MY TAKE

IIP nos - OCTOBER 2009
ANALYSIS - my take

pl look at following points ......

1... gross no 290.1 is lower than july 2009 no which is a comparable month .... first month of a new quarter

this can not be ignored as this is contra-trend and needs to be watched carefully.

2... consumer non durable no of 264.1 is lowest since nov 2007 ( excluding aberration of oct 2008 ). inbetween we hv hit a high of 323 and 331 in dec 2008 / jan 2009 respectively.

this is alarming. whole FMCG sector could be under stress. i will not be surprised to see 6 to 8 % cuts in stock prices in this sector. looks like drought is taking its toll.

3...intermediate goods no of 284 is lower than may 2009 ..... is it a precursor of a slowing economy ? ? ? watch auto component stocks .... they could be in some trouble imdtly ......

4.... basic goods no is at 246 .... nearly at the peak ..... if this no was to be at sept level .... we wud hv shown a gross no around 286/87 ... which wud hv been a disaster ...

never the less, i dont expect a much stronger no in the coming months since this is dominated by mining and electricity - about 60/70 % contribution - .... that means alsthough the YOY gross nos still may look good .... we r going to struggle to show a strong MOM performance ..... which shud be there if economy is really getting strong . this also means we may struggle to reach 9 % IIP growth that is being projected.

the corollary is that we may reach just about 6 to 6.5 % GDP growth .... considering marginal de-growth in agriculture. the fig of closer to 7 % may remain a pipe dream.

the scenario is absolutely reallistic and barring unprecedented liquidity from FIIs , this paints a bearish picture for equities in coming months. there may not be collapse of markets like in begining of 2008 and 2009 but they will be soft.

any thoughts / comments from your side are welcome ......