IIP: Sending the right signals... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

IIP: Sending the right signals...

Jan 14, 2005

Over the last few days, the Indian indices have witnessed strong selling pressure, resulting in the benchmark index (the BSE-Sensex losing nearly 9% from its all time high of 6,679 points recorded on Jan 3, 2005. This fall was attributed to profit booking on account of a 'healthy' correction and also to the vibes from the US Federal Reserve on the interest rate scenario. One of the major triggers to the downfall was the release of the minutes of the Fed meet in December, which mentioned that interest rates in the US are likely to rise at a faster rate. However, soothing statements by the Finance Minister and the scrapping of the controversial Press Note 18 brought back the investors to the markets, which saw the indices closing strongly in yesterday's trades. Also aiding the sentiment was the economic performance as indicated by the IIP (Index of Industrial Production) figures released for the period of April-November 2004. Let us take a look at some important points of the same.

  1. The official IIP registered a growth of 7.9% in November as compared to 8.2% during the corresponding period last fiscal. For the eight-month period, April-November, the growth figures look more attractive with 8.4% YoY growth as compared to 6.4% during the same period last fiscal.

  2. A major contributor to this growth was the manufacturing sector, which witnessed YoY growth of 8.9% during the first eight months of the current fiscal as against 7.1% during the corresponding period last fiscal. The index of capital goods has jumped by 13.5% during the said period as against 9.7% during the corresponding period last fiscal.

  3. The consumer durables segment also grew at a healthy 15.8% during the first eight months of the current fiscal as compared to 8.7% growth witnessed during the same period previous fiscal. Higher income resulted in higher purchasing power, which led to this growth.

The below mentioned table gives a quick glance of the growth witnessed by the major sectors of the IIP.

Sectoral growth
Sectors April-Nov '03. April-Nov '04 (%) change
Mining 140.3 147.2 4.9%
Manufacturing 188.9 205.7 8.9%
Electricity 168.3 179.7 6.8%
General 181.7 196.9 8.4%

One major factor that draws the attention is the growth of 13.5% in the capital goods segment. This comes on the back of improved economic performance on the macro level and stronger balance sheet of India Inc. To put things in perspective, global economy witnessed a sort of recovery led by a hike in commodity prices during the last year. All this while, the Indian industry had not witnessed any significant capacity expansion and addition, resulting in the narrowing of the demand and supply gap. However, in order to address the rising demand, huge capex plans have been lined up, thereby resulting in higher non-food credit offtake for the banking sector.

This should, under normal circumstances, augur well for the banking sector as well. However, competitive pressures have resulted in an insignificant rise in interest rates. Further, the government has shown its intent to speed up the construction and infrastructure activities, which would help the economy in the long run. All in all, the economy is on a right path to growth in the current fiscal and the long-term signals seem to be positive for the investors.

Equitymaster requests your view! Post a comment on "IIP: Sending the right signals...". Click here!

  

More Views on News

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

ONGC to NMDC: Here are 5 Stocks Value Investors Should Closely Track (Views On News)

Nov 26, 2021

Before investing in value stocks, research the company and gain insight into why the market is discounting it.

Top 5 Stocks FIIs Bought and Sold Recently (Views On News)

Nov 25, 2021

FIIs have largely stayed on sidelines for the past few months, withdrawing money across emerging markets.

Everything to Know About the Upcoming Tega Industries IPO (Views On News)

Nov 27, 2021

Are you looking to apply for the Tega Industries IPO? You must ensure that you know specific details.

3 Charts on Why the Indian Bull Looks Tired podcast (Views On News)

Nov 27, 2021

Rahul Shah explains the key reasons behind his pessimistic outlook on the stock market.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Nov 26, 2021 (Close)

MARKET STATS