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The Industrial Production Index (IP) grew 7.3% yoy in March, above the revised 3.7% (from 3.6%) yoy
growth in February. The IP reading was significantly higher than the Bloomberg consensus expectation of 4% yoy
and our expectations of 3.6% yoy growth. Sequentially, IP rose 3.8% mom, s.a. in March after being weak in the
last four months. IP grew 7.8% yoy in FY11 compared to 10.5% yoy in FY10.
The Capital Goods Index recovered sharply. The lumpy Capital Goods Index accelerated to 25.9% mom, s.a.
after a 4.8% mom, s.a. decline in February. Consumer goods growth moderated to 7.7% yoy in March from 11%
yoy in the previous month, mainly due to a fall in the Consumer Durable Goods Index. However, consumer nondurables
kept its momentum and grew at 1.5% mom, s.a., after a 0.6% mom, s.a. increase in the previous month.
The strong IP print suggests that there isn’t a significant near-term slowdown in activity. The jump in capital
goods after several months of sequential declines is heartening. Notwithstanding the volatility in IP in recent
months, the above-consensus print conforms to other activity indicators which do not yet indicate any significant
slowdown in activity. The April HSBC/Markit PMI remained elevated at 58.0. Non-oil imports growth was robust at
21.0% yoy in March. Bank credit growth also remained high at 21.6% yoy in March. We expect activity to weaken
gradually as the impact of rate increases and financial conditions tightening begin to feed through. Our GDP growth
forecast for FY12 remains at 7.8%.
We think this will allow the Reserve Bank of India (RBI) to continue to focus on inflation and tighten
monetary policy. We continue to expect an above consensus 75 bp in rate hikes in the remainder of 2011 after
the 50-bp rate hike on May 3. We expect the RBI to hike policy rates by 25 bp in the June 16, 2011 meeting. WPI
inflation numbers for April will be released on May 16, and we expect it to come in at 8.6% yoy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The Industrial Production Index (IP) grew 7.3% yoy in March, above the revised 3.7% (from 3.6%) yoy
growth in February. The IP reading was significantly higher than the Bloomberg consensus expectation of 4% yoy
and our expectations of 3.6% yoy growth. Sequentially, IP rose 3.8% mom, s.a. in March after being weak in the
last four months. IP grew 7.8% yoy in FY11 compared to 10.5% yoy in FY10.
The Capital Goods Index recovered sharply. The lumpy Capital Goods Index accelerated to 25.9% mom, s.a.
after a 4.8% mom, s.a. decline in February. Consumer goods growth moderated to 7.7% yoy in March from 11%
yoy in the previous month, mainly due to a fall in the Consumer Durable Goods Index. However, consumer nondurables
kept its momentum and grew at 1.5% mom, s.a., after a 0.6% mom, s.a. increase in the previous month.
The strong IP print suggests that there isn’t a significant near-term slowdown in activity. The jump in capital
goods after several months of sequential declines is heartening. Notwithstanding the volatility in IP in recent
months, the above-consensus print conforms to other activity indicators which do not yet indicate any significant
slowdown in activity. The April HSBC/Markit PMI remained elevated at 58.0. Non-oil imports growth was robust at
21.0% yoy in March. Bank credit growth also remained high at 21.6% yoy in March. We expect activity to weaken
gradually as the impact of rate increases and financial conditions tightening begin to feed through. Our GDP growth
forecast for FY12 remains at 7.8%.
We think this will allow the Reserve Bank of India (RBI) to continue to focus on inflation and tighten
monetary policy. We continue to expect an above consensus 75 bp in rate hikes in the remainder of 2011 after
the 50-bp rate hike on May 3. We expect the RBI to hike policy rates by 25 bp in the June 16, 2011 meeting. WPI
inflation numbers for April will be released on May 16, and we expect it to come in at 8.6% yoy.
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