Robust IIP numbers fail to cheer markets

Robust IIP numbers fail to cheer markets
The Financial Express, November 13, 2009, Page 4

fe Bureau
The robust growth in India's industrial production for the month of September 2009, which was better than expected, failed to cheer the street sentiments with the key domestic equity indices ending the day on a negative note. A section of the market feels that the four months of strong rebound in domestic industrial activity would give enough headroom for the Reserve Bank of India (RBI) to go ahead with its liquidity tightening policy. India's industrial activity for the month of September rose to 9.1% while the government revised upwards the IIP figures for August 2009 to 11% from 10.4%.

"The IIP figures for the month of September were much higher than general expectation which is a very strong sign of growth coming back to the economy," said Siddhartha Sanyal, Economist at Edelweiss Capital.

On a similar note Deven Choksey, MD, KR Choksey Securities, said, "With the IIP figures in the last few months showing a rebound, the September data were by and large on expected lines. The growth has been primarily driven by capital goods and consumer durables mainly on the back of robust demand from the rural sector and festive season demand."

Experts feel that for the economy to be on a strong growth momentum, activity in India's export sector should pick up that would help broadbase the domestic growth. "So far the growth has been primarily seen in strong domestic demand driven sectors," said Sanyal. "So if there is some kind of an uptick in export-based sectors in the coming months, we will see further uptick in the growth momentum".

However, consecutive four months of decent growth in the industrial production has also raised concerns of an early monetary tightening by the RBI among the market participants. This resulted in a sell-off in rate sensitive realty and banking sectors stocks. The BSE realty was the biggest loser down 3.05% lead by DLF that slid 3.44% or Rs 13.20 to close at Rs 384.05. Similarly the BSE Bankex lost 2.53% lead by State Bank of India, which was down 3.51% or Rs 83.45 to end the trading session at Rs 2,379.35.