INFOSYS, IIP AND INFLATION - ALL GIVE MARKET A SORE EYE
By Ruma Dubey
| PARTICULARS | Feb’13 | Jan’13 | Dec’12 | Nov’12 | Oct’12 | Sept’12 | YoY |
| IIP | 0.6% | 2.4% | -0.6% | -0.1% | 8.2% | -0.4% | 4.3% |
| Cons Durable | -2.7% | -0.9% | -8.2% | 1.9% | 16.5% | -1.7% | -6.2% |
| Manufacturing | 2.2% | 1.1% | -0.7% | 0.3% | 9.6% | -1.5% | 4.1% |
| Capital Goods | 9.5% | -1.8% | -0.9% | -7.7% | 7.5% | -12.2% | 10.5% |
| Basic Goods | -1.8% | 3.4% | 2.6% | 1.7% | 4.1% | 3.5% | 7.6% |
| Mining | -8.1% | -2.1% | -4% | -5.5% | -0.1% | 5.5% | 2.3% |
| Electricity | -3.2% | 6.4% | 5.2% | 2.4% | 5.5% | 3.9% | 8% |
| Cons Non Durbl | 2.9% | 5.3% | -1.4% | 0.3% | 10.1% | 1.1% | 4.4% |
| Interm Goods | -0.7% | -2.5% | -0.1% | -1.1% | 9.4% | 1.8% | 1% |
Feb IIP came in at 0.6%, less than 1% and the market was relatively happy and analysts also seemed pretty peaceful. And this explains the times we are living in today where as long as growth is in the positive, albeit low growth, that’s enough reason to feel good. Many have started saying that the worst is probably over and we will now start building up on this base. Yes, we Indians are optimists first, always believe that “sab kuch theek ho jayega” and that, well, is a good spirit to have instead of having a morose mindset. At least this gives us hope to look forward into the future and yes, what this also means is that maybe the velocity of the fall has been arrested and we could now see is a gradual but painful climb back into good growth. This will take a while but just like optimism, tolerance is also a virtue we Indians have developed and we owe these virtues to entirely our politicians and system.
Close on the heels of IIP, the Consumer Price Index (CPI) which is basically the retail inflation was released. For March, it came in a bit lower at 10.39% compared to 10.91% in Feb. Though MoM this is a small fall, this is nothing major to celebrate about as inflation continues to remain stubbornly in the double digit. What has helped this marginal fall is the price fall (MoM) of pulses, sugar, vegetables and oil/fats. But all these price falls were too minor and given the onset of summer, does seem sustainable. Seasonally, price of vegetables rise in summer and if monsoon plays truant this year, well, inflation could once again take center stage over growth. So this CPI number, just like the Feb IIP number does not really indicate anything which is why the markets chose to concentrate on the poor Infosys guidance and numbers and continued to butcher the markets.
Infosys grossly disappointed the market; the disappointment was bigger as the number in Q3 had raised some hope that things were out of the wood. But the not-so-good Q4 numbers and an overtly conservative FY14 guidance culled the entire feel-good factor. What we are seeing is probably the bottom of this poor growth in the company and it is sure to bounce back from here but like the IIP, it will slow and painful. The stock price is not going to hit new highs in a hurry and it would not be surprising to see some more price deterioration.
For now, the market is digesting all the three “I” of the day but Monday will be another day, another fresh week. Corporate results will once again take center stage and individual stocks will dictate the moods. Reliance Industries is expected to announce its numbers on 16th Feb; HCL Tech, TCS and Yes Bank on 17th, IndusInd on 18th and Wipro on 19th.
The Credit Policy is scheduled for 3rd May and given the facts of today, clearly, one does not the Governor to do anything; it could be a complete non-event.