INFLATION - Infosys Results did not make News as INDEX OF INDUSTRIAL PRODUCTION (IIP) Falling

Infosys results did not make good news today as INDEX OF INDUSTRIAL PRODUCTION (IIP) is falling by about 3%

High inflation numbers and six-year-low IIP figures pulled the markets southward with the BSE Sensex shedding 215 points or 1.6 per cent at 13,710 levels.

The broader market Nifty is also witnessing selling pressure and it is trading at 4118, down 44 points.

Earlier, Infosys Results posted a better-than-expected first quarter results, with net profit going up by 4.2 quarter to Rs 1,302 crore

Soruce

IIP numbers snapshots:May IIP growth is at 3.8% versus 10.6% (YoY)April Industrial Growth revised to 6.2% versus 7% earlierApr-May IIP growth is at 5% versus 10.9% (YoY)May manufacturing growth is at 3.9% versus 11.3% (YoY)May mining growth is seen at 5.2% versus 3.8% (YoY)May electricity growth is at 2% versus 9.4%May basic goods up 3% versus 10.3% (YoY)May capital goods is seen at 2.5% versus 22.4% (YoY)May intermediate goods growth is at 1.2% versus 8.8% (YoY)May consumer goods growth is at 7.2% versus 8.7% (YoY)May consumer durables growth seen at 4.4% versus -0.7% (YoY)May consumer non-durables growth is at 8.1% versus 12.1% (YoY)May food products growth is at -8.6% (YoY)May wood and wood products growth is at -30.7% (YoY)

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More news from S.P. tulsian
INFLATION

As was expected by all, inflation for the week ended 28^th June 2008 was in the double digits, except that it was at its highest. At 11.89% it is much higher than the 11.63% recorded last week.

All commodities were up 0.1% (WoW). Food articles was up 0.6%, textiles was up 0.6%, machinery and machine tools rose 0.1%, non-food articles rose 0.4%, manufacturing was up 0.4 %; fuel, power and energy remained unchanged at 0.1%, fertilizers were up 4.5%, while basic metals was down 0.8%. Vegetable prices were up 3.7%.

Conclusion: Inflation and the market indices will continue to get ruled by the movement of the crude prices. There seems to be no let up there. Saudi has increased supply in July by 2% and that probably has helped cool down the prices. But this is just a temporary relief.

If there is no let up in inflation, the RBI is sure to step in with more measures but that is not expected to happen before 29^th July when RBI announces its credit policy. The second stage of CRR hike of 25 bps is scheduled for 19^th July and it is only after this that RBI would have some more follow up actions. But be assured, we have not heard the last from RBI.

INDEX OF INDUSTRIAL PRODUCTION (IIP)

Growth in IIP for May 2008 fell to a paltry 3.8% as against a robust 10.6% in the same month of 2007. Industrial growth for April has been revised downwards to 6.2% from 7% recorded earlier. And this downward revision is the most shocking part of it all.

Manufacturing production growth during May was down at 3.9% as against 11.3% in the year ago month. Electricity production growth slipped to 2% compared to 9% in May, 2007. Mining growth in May grew at 5.2% as against 3.8% in the same month of 2007. Consumer-goods production increased 7.2%.

Conclusion: The figures for April were revised downwards. That is a cause for concern. So does this mean that if the May figures are also revised, the actual numbers would be lower, more sharply?