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.
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.