Networth - Weekly Notes

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Small-cap, mid-cap stocks hog limelight

The first trading week of the New Year began on a positive note. However, after beginning the year with a bang, the market cooled off later.

For the week ended 5 January 2007, the barometer index BSE Sensex gained 73.61 points or 0.53% to settle at 13,860.52. The S&P CNX Nifty gained 17 points (0.42%) for the week to settle at 3983.40.

Small-cap and mid-cap stocks outperformed the market. BSE Small-Cap Index rose 299.23 points or 4.3% to settle at 7,191.55. BSE Mid-Cap Index gained 131.49 points or 2.26% to settle at 5,936.67.

The markets entered the year 2007 on a positive note. On Tuesday (2 January), the first day of trading this year, the Sensex settled at 13942.24 gaining a good 155.33 points. IT and auto stocks played anchor on the day in pulling up the Sensex. The IT stocks gained in anticipation of good Q3 results while the autos found increased buying interest on the back of favorable December month sales volumes that were announced on the day.

On Wednesday, the start was not pronouncedly bullish but the markets recovered in mid afternoon trading. During intra day trading, the Sensex had marginally crossed its all time high level of 14035.30. The Sensex closed the day 72.68 points higher at 14024.49.

Thursday was a day of volatility. However the volatility was not as strong as witnessed in sessions a fortnight back. The Sensex swung intra day 210 points. It opened strong on reports of the center and the state having agreed to phase out Central Sales Tax (CST) over the next 4 years. It touched an all time high of 14060.35. Then the correction came in with selling pressure on FMCG, IT and metal stocks resulting in the Sensex closing at 13871.71, which was 143.21 points below its previous day close.

The markets were plainly flat on Friday. Sensex closed marginally lower by 11.19 points at 13860.52. The Nifty closed lower by 5.40 points to settle at 3983.40.

Index heavy weight Reliance Industries gained 1.44% for the week to Rs 1288.60.

Infosys gained 1.53% for the week at Rs 2274.80. Infosys would be coming out with its Q3 numbers on 11th January.

Banking major ICICI Bank gained 2.25% for the week and settled at Rs.910.40. As per reports, its offshore dollar-denominated debt offering had received a strong response.

Satyam Computer firmed up. Apart from the anticipated favourable Q3 results, there are also rumours in the market that Anil Ambani is in talks with company chairman Ramalinga Raju for a stake in the company. The stock gained 3.63% for the week to close at Rs 501.50. Satyam announces Q3 results on 19 January 2007.

Ranbaxy rose 5.5% for the week to Rs 413.45. The company’s alliance with Ipca Laboratories received USFDA approval to sell atenolol tablets in the United States. Atenolol is indicated in the management of hypertension. Ranbaxy settled at Rs 413.45 to close the week.

Allcargo Global Logistics was a major gainer among side counters. It acquired Hindustan Cargo, a subsidiary of travel and forex major Thomas Cook India. Hindustan Cargo is predominantly an airfreight and logistics service provider. The stock surged by Rs.221.90 or 20.89% on the back of the development and closed the week at 1284.10.

Air Deccan grew about 5% during the week on news that it had managed to post nominal profits in the October – December quarter.

Indian real estate developer DLF has filed a prospectus for an initial public offering (IPO) after pulling a planned issue last year. As per reports, the sale of 10.2% of the company could raise more than $2 billion. This offer is said to India's biggest ever-public issue.

Commodity prices continued to correct during last week. Copper fell sharply to touch $5700 per tonne levels. The metal saw its 8-month low price being hit last week. Sterlite and Hindalco, both having copper in its product portfolio, did not lose much and closed the week more or less flat. Hindalco lost Rs.3 over the week and closed at 171.10. Sterlite lost a meager Rs.0.10 (-0.02%) over its previous week’s close and settled at Rs 543.30.

On Friday, Pyramid Saimira Theatre settled at Rs 158.20 on BSE on high volume of 1.69 crore shares, compared to IPO price of Rs 100. The stock debuted at Rs 135. It hit a high of Rs 163.85 and low of Rs 125. The company had priced its IPO at the higher end of the Rs 88 to Rs 100 price band.

On the same day, Tanla Solutions finished at upper circuit of Rs 379.80 on BSE, compared to IPO price of Rs 265. 32.63 lakh shares changed hands in the counter on BSE on the day of its debut. Tanla Solutions had priced its IPO at the upper end of the Rs 230 to Rs 265 price band.

FIIs were net buyers to the tune of Rs.3892.90 crore for January 2007 till 4 January 2007. This included FII subscription to the mega IPO of Cairn India. FII allotment in the Cairn India IPO was to the tune of Rs 3030 crore.

Mutual Funds were net buyers to the tune of Rs 164 crore by the first three trading sessions of the New Year.

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TOP STORIES

Thai policy flip-flop rattles Asia

Thailand was the focus of attention across the world, as a seemingly exaggerated reaction from its central bank to a sharp rise in its currency, the baht, brought back unhappy memories of the 1997 Asian financial crisis. On Dec. 18, the Bank of Thailand slapped unleashed a series of steps aimed at curbing the runaway gains in baht against the dollar as it was hurting the country's exports. The central bank told banks to lock up 30% of new foreign-currency deposits for a year to curb speculation and imposed penalties on overseas investments held for less than a year. The central bank responded to exporters who said the baht's 12.5% gain this year was hurting demand from overseas by making their goods more expensive.

A day after, Thailand's SET Index sank 16% to its lowest since Oct. 29, 2004. This was the biggest decline in Thai stocks since Aug. 7, 1990. The Thai currency had its biggest two-day decline since April 2005. Other regional markets too crashed amidst fears of a repeat of the 1997 financial crisis when a similar crash in baht had sparked off a regional financial crisis. The baht too dropped the most in three years after the Bank of Thailand's announcement. The bloodbath across Asian markets forced the Thai central bank to reverse part of its measures aimed at protecting exporters.

Thailand's Finance Minister Pridiyathorn Devakula said controls would remain on foreign investments in bonds and commercial paper but would not apply to equities. It also diluted its currency restrictions by excluding purchases of land, condominiums and other such property by foreigners from the restrictions. The Bank of Thailand has no further plans to place curbs on investor funds, Governor Tarisa Watanagase said later. The partial rollback propped up the mood across regional markets, but Thailand's reputation with global investors suffered a big blow.

The exercise dented the credibility of Thailand's recently installed military government. The 'two steps forward one step back' approach of the Thai central bank also proved that in today's scenario, central bankers cannot afford to have a high-handed approach towards markets, as the latter have become too powerful. A more subtle handling is a much better option given the high degree of globalisation. The events in Thailand and its fallout on the regional markets will certainly discourage other governments from considering similar measures.

Vodafone shows interest in Hutch

It's official now. Vodafone Group Plc, the world's largest mobile-phone company, is considering a proposal to acquire a controlling stake in Hutchison Essar Ltd., India's fourth-largest mobile phone operator. "The process is at an early stage and may not lead to a transaction", Newbury, England-based Vodafone said in a Regulatory News Service statement. Vodafone said that such a transaction would be consistent with its stated strategy of seeking selective acquisition opportunities in developing markets. Earlier, media reports had suggested that The Board of Vodafone had given a green signal to CEO Arun Sarin to pursue a multi-billion dollar bid for Hutch Essar. The deal is likely to value Hutch at up to US$13.5bn (£7bn), the reports stated.

Meanwhile, Hutchison Telecommunications International Ltd. said it has been approached by various potentially interested parties regarding a possible sale of its equity interests in Hutchison Essar. The Hong Kong-based company said that no agreement in respect of such possible sale had been entered into. The company reiterated that there was no assurance that a sale may result from these approaches. Shares of Hutchison Telecommunications rose while that of Vodafone fell.

It will take some time for a final deal to fructify, as three different suitors have thrown in their hats in the ring for the Indian unit of Hong Kong billionaire Li Ka-shing's Hutchison Telecommunications. Besides Vodafone, the other contenders are Reliance Communications Ltd., part of the Reliance-Anil Dhirubhai Ambani Group (ADAG), and Maxis of Malaysia. Reports say that Reliance Communications has tied up with private equity majors Blackstone and Texas Pacific for the Hutch Essar bid. In a related development Hutch Essar held a Board meeting on Friday, but didn't discuss the offers. "We did have a board meeting, but it was a routine internal quarterly meeting," Hutchison Essar Managing Director Asim Ghosh told reporters in Mumbai.

For Vodafone, any offer for Hutch Essar will hinge on it wriggling out of a one-year non-competition clause with its existing partner Bharti Airtel Ltd. Vodafone bought a 10% stake in the Bharti Airtel last year, but could sell it to help fund a takeover of Hutch. Meanwhile, Reliance Communications has sounded out its bankers to arrange the finances for the bid. ABN Amro, Barclays, Deutsche Bank and Citigroup have been roped in by the ADAG firm to finance the company's ambitious purchase. The Ruia family, which controls the 33% stake of the Essar Group in Hutch Essar, have not decided whether to sell out. Media reports say that the Ruias could even decide to buy out its JV partner.

Sensex declines 143 points

The market continued its journey downward, posting losses for the third straight week.

The barometer index lost 142.78 points (1.05%) for the week ended Friday (22 December) at 13,471.74. The S&P CNX Nifty slipped 17.50 points (0.5%), to 3,871.15.

The 30-shares BSE Sensex gained 116.57 points, to 13,731.09, on 18 December, on strong buying in index pivotals, especially for index heavyweight Reliance Industries (RIL).

The BSE Sensex plunged 349.08-point on 19 December 2006, to 13,382.01, amid high volatility following a sell-off across Asian emerging markets, sparked by a 10% penalty imposed on foreign funds moving out Thailand within a year, by its central bank.

The Sensex lost 41.80 points to 13,340.21 on 20 December following a mixed trend in index pivotals.

The BSE Sensex settled with a gain of 44.65 points, at 13,384.86, as buying resumed. On 22 December 2006, the BSE index gained 86.88 points, to 13,471.74, as buying picked up in the fag end of the trading session.

PSU oil exploration major ONGC advanced 5.7% to Rs 869.There were reports of huge gas finds in the Bay of Bengal, initial estimates suggesting reserves of about 21 trillion cubic feet.

Reliance Industries (RIL) advanced 1.5% to Rs 1,272. It has paid an advance tax of Rs 444 crore for the third installment, taking its total remittance to Rs 1,102 crore, compared to Rs 848 crore paid in the same period last year, reports said. Also, there were reports that RIL is talking with the Russian government for permission to invest in a refinery and petrochemical industry there. Unconfirmed reports suggested that the company had acquired Orient Craft, a leading garment exporter.

Maruti Udyog rose 2.13% to Rs 922.10, after the Cabinet Committee on Economic Affairs (CCEA) approved the sale of the government's residual 10.2% stake. Japanese car giant Suzuki has a majority 54.2% stake in the company. The government's stake in Maruti is valued at Rs 2,800 crore.

PSU engineering major Bhel lost 8% to Rs 2,310. The scrip declined as it failed to secure ceratin equipment orders for the upcoming ultra mega power projects. It also bagged a Rs 165-crore order from IOC for setting up a power plant at the oil major's Haldia refinery in West Bengal.

FMCG bigwig, ITC, slipped 2.90% to Rs 169.55, amid reports that it will expand fruit, vegetable retail as well as the wholesale business by opening 54 new outlets in select metros in the next three years. The company will target metropolitan cities for these wholesale-cum-retail stores. Currently, there are 6,500 e-Choupal kiosks in over 38,000 villages across nine states.

Telecom software firm, Tech Mahindra, jumped 46.36% to Rs 1,651. It had announced signing of a five-year deal to provide BT with strategic sourcing services. This contract is expected to generate in excess of $1 billion new revenue for Tech Mahindra. The company will support BT’s planned growth of managed services to business customers around the globe, while continuing ongoing services related to BT’s internal systems, processes and re-usable platforms.

L.T. Overseas settled at a slight discount, at Rs 55, compared to its IPO price of Rs 56 per share on 18 December 2006. The stock listed on BSE at 7.14% premium, at Rs 60, and hit an intra-day high of Rs 62.90. The intra-day low was Rs 51.

On 20 December 2006, Sobha Developers settled at premium at Rs 968.75 on BSE, compared to its IPO price of Rs 640 per share. The scrip debuted at Rs 1,111.25 on BSE and hit a high of Rs 1,179. Its low was Rs 918.10. Sobha Developers’ IPO was subscribed over 100 times.

Ruchira Papers finished at a discount, at Rs 20.95 on BSE, compared to the IPO price of Rs 23 per share on 20 December. The stock listed on BSE at 5.86% premium, at Rs 24.35 per share, which was also its intra-day high. The stock dipped to a low of Rs 20.65.

On 21 December, Great Offshore settled at Rs 727.05. Great Offshore came into existence following a restructuring of GE Shipping, whereby the shipping firms’ offshore services business was transferred to a separate company.

Jindal Drilling & Industries settled at Rs 580 on BSE, on 22 December. Jindal Drilling’s restructuring scheme involved the amalgamation of two group companies Newsco Newtech and Discovery Hydrocarbons with the company. It also involved demerger of Jindal Drilling’s Casinvest division into Haryana Engineering.

India's wholesale price index rose 5.32% in the 12 months to 9 December, which is higher than previous week's annual rise of 5.16% due to an increase in food prices. The annual inflation rate was 4.39% during the corresponding week of the previous year, data released on Friday showed.

Meanwhile, RBI on 15 December came out with new capital market exposure norms for banks, which will come into force from April 2007. In terms of the new guidelines, the exposure of a bank to the capital market cannot exceed 40% of its net worth as on 31 March of the previous year.

Weekly close: Again ready for a bounceback

It was the week of big correction as Sensex showed a free fall in the first two days with a loss of almost 1000 points but soon it bounced back and showed a smart recovery of almost 600 points in the last three days of the week. The sessions were really volatility over the week with Sensex ending down by 1.4% from the previous weekly close. Markets saw severe selling pressure and there are many notes giving excuses for the same starting with the surprise CRR hike, advance tax withdrawals, sudden FII selling pressure and then to add to that the weak IIP numbers which means some slowdown so on so forth that created panic among investors. But this free fall was used by investors as an opportunity to get in.

The Reserve Bank of India surprised the markets on Friday last week by raising the cash reserve ratio (CRR) by 50 basis points to 5.5 percent to be implemented in two stages starting December 23. Reasons cited were high WPI and CPI inflation. The intention is to tighten liquidity conditions, to moderate the frenetic pace of bank lending and also to manage expectations of higher inflation. The hike will soak up Rs 13,500 crore from the financial system. This seems to be against the long term goal of RBI to reduce CRR to 3 percent. WPI seems to be quite manageable at 5 - 5.5% but CPI has been around 7%. Clearly, the banks' cost of funds will go up, forcing them to tweak upward the sub-PLR loan rates. Banks immediately felt the pressure of this hike and tumbled as the trading started on Monday.

The Indo US Nuke deal was finally passed in the US. This deal is important to India for reasons stated earlier. There is a large capacity to come up and its enriched Uranium which is not available. The political hurdles still exist and there will be debates on whether Indian sovereignty has been compromised. However this is a big thing happening in the power sector. The expectations have begun to creep in that the economy is slowing.

The Federal Reserve noted a "substantial cooling" in the housing market but also kept its emphasis on inflation fighting in the statement accompanying its decision to leave interest rates unchanged. The Fed has not softened its stance towards interest rates and thats confusing. The dollar was down post the Fed comments. Markets are seeing the possibility of a rate cut by March. Interestingly there was positive data for the US dollar. The U.S. trade deficit narrowed sharply in October. We view that a weak dollar as the negative for the US which has so far had a strong dollar policy. Given this uncertainty, Central Governments will be diversifying their forex holdings on the sly so as not to deliver a dollar shock. Its in the interest of everyone.

Century Textiles informed that voluntary retirement scheme (VRS) for the Mumbai textile mill, of a total staff strength of 6600, about 6300 workers have opted for voluntary retirement. As per reports on an average, in the new VRS scheme, the workers were given Rs 9 lakh to Rs 10 lakh which works to around Rs 600 crore. The Worli mill had been losing money on the back of high costs such as electricity at Rs 4.25 paise per unit, water at Rs 45 per 1000 litres, octroi at 4% and Rs 400 as wages per worker per day. This year the company inducted Kumar Mangalam Birla, on the board. BK Birla is now 80+. Certainly, we feel that Kumarmangalam is taking active interest. The company has 30 acres of land in the heart of the city of which roughly of 10 acres, was taken on lease from Bombay Dyeing on a 999-year lease and can be extended for another 999 years. This land is worth over Rs 100 per share. The land is likely to be used for development. A Marwari would not pay Rs 350 crore for nothing. On an EV per tonne basis at current levels $ 167 seems to be fair for Century. Better Operational performance will be the driver ahead. The stock fell by almost 17% in the initial carnage but recovered handsomely by more than 16% in last three days.

ESPN Star Sports has won the ICC telecast rights for an eight-year period starting 2007. Industry estimates that ESPN Star's bid was at $1.1 billion followed by Nimbus at $900 million, Zee ($850 million) and Tensports ($825 millon). This news created negative sentiments initially however the positive about this bid is that Zee is not going overboard to get the programmes. It would have been a big risk. Risk needs to be taken for returns but it needs to be managed well. The stock tumbled initially by 12% reacting to the news but again pulled back by more than 10%. Zee Telefilms is going for restructuring and it will demerge itself into three entities namely Zee Entertainment, Zee News Limited, and Wire & Wireless India Ltd.(WWIL). Zee Telefilms will be delisted from today itself and the Zee entertainment will be relisted on 18th December while the othe two entities will be listed in January. This restructuring will bring clarity in the business.

The mid caps have started joining the party and more is possible next week. However the worry is from the global markets where the US cues are not too encouraging. Indian Markets made a sharp recovery as was the fall and this good news should bring in more momentum. However it has brought forth the risks and we believe that the large caps will be seen more cautiously than ever before. We believe that the valuations are high and thats the bane for now. However in the near term the advance tax figures will bring in some gains.

Indiainfoline - INVESTMENT STRATEGY

Christmas Shopping or Christmas Sale?

Christmas is still over a week away but bulls and bears are left directionless. The fall in the market this week, forced investors to be on the guard. People on the Street were getting into the habit of seeing the market go higher and higher. A short downtrend immediately has thrown up their concern list. Having said that, one can look at investing in fundamentally strong scrips for the long term. Advance tax numbers are already doing the rounds. According to reports advance tax figures paid by the companies are as follows, Grasim: Rs2bn, Hindalco:Rs3bn, Reliance Industries: Rs4.44bn and Glaxo: Rs580mn. Volumes will again play a major role this time around as at the start of the week, the markets fell sharply with huge volumes. The recovery has not be accompanied by healthy volumes. Despite the volatility on the bourses, Foreign Investors interest in India continues to remain pretty strong. They hedged their positions by buying in cash and selling in F&O. Overseas liquidity is likely to slow down. When volumes are less, expect dullness with occasional swings.

Indiainfoline - MARKET MOOD

It could have been worse

The beginning of the week wasn't as rosy as the end. All the euphoria of the past five months seemed to be gone in just two trading sessions. After being on a dream run, the markets were looking for an excuse for correction. The Reserve Bank of India's announcement of a hike in the CRR became a trigger. Also, lower-than-expected industrial production data contributed to the bulls' misery. Industrial output growth for October slowed to a 10-month low, much lower than estimated. Production at factories, utilities and mines grew by just 6.2% from a year earlier, after gaining 11.4% in September. Capital Goods stocks were the worst hit as growth in Capital Goods was sharply down from last year. The surprisingly weak data raised questions over the growth of the Indian economy. BHEL, Tata Steel, ITC and SBI were the major losers in the Sensex. While, Satyam and Dr Reddy's were among the notable gainers.

Selling was seen in Auto, Sugar, Capital Goods, Metal, Mid-cap and Oil & Gas stocks. While IT stocks bucked the negative trend and closed with gains led by Satyam. Finally, the Sensex closed the week at 13614.52, down 1.3% or 185 points after hitting a low of 12,801.65 and a high of 13,801.98. The NSE Nifty fell by 1.85% or 73 points to close at 3888.56 as the indices recorded their second consecutive weekly decline.

Banking stocks bore the brunt of the selloff after the RBI unexpectedly raised the CRR by 50 basis points. The action will drain Rs135bn from the banking system, at a time when the demand for credit is pretty strong. Index heavyweight SBI lost by over 6.5% to Rs1264, while HDFC Bank dropped 2.5% to Rs1057 and ICICI Bank edged lower by 0.7% to Rs870. Among the Mid-Cap stocks, PNB lost over 8% to Rs507 and Bank of Baroda slid 5.8% to Rs246.

Selling was also seen in FMCG stocks. Index heavy weight ITC declined 5.5% to Rs174, HLL dipped 1.5% to Rs230 and Nestle slipped by over 1.9% to Rs1063. However, Colgate bucked the negative trend and surged 2% to close at Rs381. Among the auto stocks Bajaj Auto fell by over 2.9% to Rs2571, Maruti shed 2.8% to Rs905. Hero Honda was down 1.7% to Rs730 and Tata Motors dropped 1% to Rs857.

Capital Goods stocks were on the receiving end following lower than expected growth in IIP. Companies across the sector managed to recoup some of the losses, as the long term view on the sector remains positive with increasing infrastructure activity and expansion in capacities by the companies. BHEL declined by over 5% to Rs2496, Punj Lloyd dropped by over 1% to Rs1011, Siemens was down 2.9% to Rs1132. However, L&T gained 0.5% to Rs1459.

Sugar stocks attracted interest as reports stated that the Government may lift a ban on sugar exports between December 18-21. The ban was introduced in July to curb rising prices due to tight supplies, and was due to run until the end of the financial year in March. But, given the selling across the board, most of the sugar scrips ended in red. Renuka Sugar plunged by over 10% to Rs476, Bajaj Hindusthan dropped 8.3% to Rs234, Uttam Sugar fell .6% to Rs35, Balrampur Chini was down 7.2% to Rs3 and Sakthi Sugar lost 6% to Rs105.

Among the telecom stocks, Reliance Communications performed exceptionally well and managed to close at a record high of Rs466, adding over 4%. The company is planning to acquire Hutch Essar, one of the leading GSM service providers in a bid worth up to US$14bn. However, other telecom stocks fell sharply with Bharti Airtel losing 2.7% to Rs616 and VSNL dropping 5% to Rs404. Cement stocks lost ground on the back of profit booking. ACC lost by over 4% to Rs1058, Mangalam Cement declined 4.4% to Rs197. Kakatiya Cement slipped 4.6% to Rs106, Grasim fell 1% to Rs2728 and India Cements was down 1% to Rs228.

SpiceJet zoomed by over by 5% to Rs56. New Delhi-based low cost carrier announced that it plans to raise US$118.5mn through a preferential allotment of equity shares to a clutch of foreign and domestic investors, including the Tatas. Airline stocks were also a buzz with reports that the Government may ease rules on local airlines that want to start international flights.

Aurobindo Pharma climbed by 2.5% to Rs696 after the company's Board approved a proposal to merge APL Sciences and Senor Organics, two wholly subsidiaries with itself. The company also received MEB Netherlands' approval for Simvastatin.

Indiainfoline - Top Stories

RBI hikes CRR to curtail inflation


Dr. YV Reddy, the Governor of the Reserve Bank of India (RBI) never fails to surprise the markets. In yet another instance of his penchant for catching the markets off guard, he has hiked the Cash Reserve Ratio (CRR) by 50 basis points, to 5.50%. The increase is to be implemented in two phases, first on Dec. 26 and the second one on Jan. 6. The CRR is a proportion of deposits that banks must keep with the central bank as cash. The higher the CRR, less is the money available with the banks for the purpose of lending. The CRR hike is expected to suck out Rs130-140bn from the banking system. It will increase the cost of funding for banks and eventually result in increase in interest rates across the board. A slew of banks announced a revision in their interest rates. While SBI raised only the deposit rates, ICICI Bank went ahead with an increase in both the lending rates and the deposit rates. The PSU banks are reluctant to raise lending rates on their own without getting a green signal from the Finance Minister. However, if more private banks joint the rate hike bandwagon nationalised banks won't have much of a choice. The liquidity will also get squeezed in the coming days owing to advance tax payments, fresh bond auctions and the CRR hike. The move is unlikely to have a major impact on the banks' profits. But, doing business won't be easy going ahead in an environment of rising interest rates and growing credit demand. What remains to be seen is whether the RBI goes for another tightening in January. Right now, most bets are on another hawkish policy from Governor Reddy.


October industrial output falls sharply


The unprecedented expansion in industrial growth over the last few months came to an abrupt and a rather unexpected halt in October. What's worse is that the driver of the strong growth in the first half i.e. manufacturing is the main culprit this time round. The Index of Industrial Production (IIP) grew by only 6.2% in October 2006 as against 9.8% in the same month last year. Manufacturing, with more than 75% weightage in the IIP, saw its growth decline sharply, from 10.9% last year to just 6% this year. At the same time, mining and electricity actually did better than last year, growing by 4% (-0.1%) and 9.7% (7.7%), respectively.

If one digs deep into the numbers, one finds that capital goods growth decelerated sharply, from 24.3% to 8.2%. Within the Consumer Goods space, both Consumer Durables and Non-Durables registered weaker growth of 2.4% (16.4%) and -0.4% (14%), respectively. Another thing to note is that among the 17 industries, Food Products (90.83% weight) clocked a negative growth of 9.7%. Basic Chemicals & Chemical Products (140% weight) saw its growth fell from 9.3% to 1.9%. Machinery & Equipment (6.4%) and Transport Equipment & Parts (5.4%) were the other two industries where growth was sharply down from October last year.

One reason for the steep slowdown in industrial activity could be that companies chose to dip into their inventories built up over the previous months. another factor could be that the Diwali festivities fell in October instead of November. So, the number of working hours were lower than usual. Also, the base last year was higher, especially for manufacturing at 10.9%. Lastly, key components with high weightage failed to turn up the heat. So, there is no need to lose sleep over what appears to be a blip or an aberration in an overall buoyant environment for industrial growth. One will have to wait for the data for November and December, before jumping to any conclusion.

Networth Stock - Weekly Notes

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Networth - Weekly Notes

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