DECEMBER IIP DATA:

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-0.6% VS -0.1%(MOM)SOURCE CNBC TV 18

Index of Industrial Production (IIP) has grown at (0.6%) for December 2012 (below market expectations of ~1%) compared to (0.8%) in November 2012 (MoM) [revised downwards from (0.1%)] and 2.7% in December 2011 (YoY). The cumulative growth for the period April-Dec 2012-13 stood at 0.7% vs. 3.7% over the corresponding period of the previous year.

Outlook – IIP headline data for December came slightly below street expectations. The muted growth in IIP was mainly on the back of continued weakness in the overall industrial activity, weak growth in core industrial output, especially in coal, natural gas & fertilisers and continued contraction in the overall vehicles sales including passenger cars. Consumer, both discretionary and non-discretionary are showing signs of slowdown, with durable showing very acute degrowth

With results season almost over, the street will look forward to passage of various important bills like insurance, pension etc in the budget session of the Parliament. In addition, investors will keep a vigil on the Union Budget…..a non–expansionary and progressive budget, with contained fiscal deficit and elements to take the economy back on the accelerated growth path. This could lead to a rally in march. The correction in the market is an opportunity for the investors to get into the market. We recommend investors to buy quality stocks with focus on rate-sensitive sectors like Financials, Auto, reforms-led sectors like Oil and Gas and Media. With revival in US economy, IT can emerge as an dark horse for FY14.

Sector-wise growth indicator

· Manufacture sector growth at -0.7% vs. 2.8% (YoY)

· Mining sector growth at -4% vs. -3.3% (YoY)

· Capital sector goods growth at -0.9% vs. -16% (YoY)

· Electricity sector growth at 5.2% vs. 9.1% (YoY)

· Basic goods growth at 2.6% vs. 5.5% (YoY)

· Intermediate goods growth at -0.1% vs. -1.5% (YoY)

· Consumer durables goods growth at -8.2% vs. 5.1% (YoY)

· Consumer non durables goods growth at -1.4% vs. 13.8% (YoY)

The Index of Industrial Production (IIP) number is expected to have grown at 1.1 percent in December, reports CNBC-TV18's Latha Venkatesh.

A growth of 1.1 percent would not be a bad achievement because December 2011 saw an uptick in industrial production and therefore even at 1.1 percent, economy would not have done too badly. The reasons why we expect such a tepid number is because the high base. Auto sales were pretty dismal in the month of December even January was nothing to write home about. 

Also, now we have the Central Statistical Organisation (CSO) forecast for the full year, which is not very enthusiastic. From April to November, IIP grew by 1 percent. Overall for the full year FY13, the CSO forecast is 1.9 percent. Logically therefore growth should pick up by December. That gives the impression that maybe December will not be as bad as the previous month’s. So we could get a surprise of maybe 1.4 percent or thereabouts.

The other reasons why December could throw up a pleasant surprise later today when we get the numbers are two-fold. One is that the core sector number was not bad. At 2.6 percent, it may look small but 2.6 is representing about 38 percent of the IIP number that will come out later today.

More importantly, the index number of the core sector at 1.54 percent is the best number that we have had for all of 2012. So, it is even better than the October number of 8.3 percent largely because of a low base. So, the core sector number was very good.

The other number that was good was exports. Although, everybody looks at the December trade deficit number as an ugly USD 17.5 billion or thereabouts, exports did not do too badly. Standalone export growth was better than any of the previous months of FY13. Therefore, chances are that given this export figure and given the core sector figure, we could be in for a mild surprise on the IIP front.