Despite a weak industrial output, the Indian share markets recovered from a weak opening and traded well above the dotted line in the last two trading hours. Barring FMCG and pharma, all the sectoral indices, are trading positive with banking and consumer durables stocks being the biggest gainers.
As per a leading financial daily, Index of Industrial Production (IIP) reversed the declining trend in April 2012, after a 3.5% downfall in the previous month, but grew by a dismal 0.1%. The stagnation in the monthly output has been on account of a 3.1% contraction in mining output and a sluggish 0.1% rise in manufacturing. However, the electricity produced was higher by 4.6%. The slowdown is also reflected in the sliding production of intermediate goods and capital goods that fell by 1.4% and 16.3%, respectively in April.
The slowdown in industrial production in April reinforces recessionary trends after economy grew by a mere 5.3% in the March 2012 quarter, the slowest GDP growth in the last nine years. This has further raised expectations of rate-cuts by Reserve Bank of India (RBI) in its mid-quarterly review on June 18 to boost the sagging economy.
Automobile stocks are trading mixed with Maruti Suzuki trading the strongest and Bajaj Holdings & Investment trading the weakest. A leading business daily has reported that passenger vehicle manufacturer Maruti Suzuki's plans to transport one-third of its production from its Manesar plant by rail has seen some speed bumps. It is believed that the Haryana State Industrial and Infrastructure Development Corp. Ltd (HSIIDC) has not succeeded in acquiring land for the dedicated tracks for 18 km stretch from the plant to Patli station. Maruti is keen on doing so because it wishes to reduce its dependence on road transport given that the output from the plant is expected to cross 3 m units in a period of three to four years. In addition, transportation by rail would help the company reduce logistics time and cost. There would also be lesser wear and tear for the vehicles. The company is now believed to be pushing the Indian Railways to establish an alternative. The company currently transports about 5% of its production by rail and is unable to expand the same due to lack of infrastructure facilities.
This partnership between Maruti and HSIIDC was granted clearance in 2008. However, as per an official of the latter, there seems to be an issue related to whether this track will be exclusively used by the auto manufacturer or will be open to all industries in the Manesar region. HSIIDC and Maruti are believed to now submit a detailed project report to Northern Railways. On approval, the partners will construct the line and a commercial agreement between them and Northern Railways will be signed.