The Hindu Business Line : For marketmen, IIP numbers are in line with expectations

The Index of Industrial Production (IIP) figure of 5.4 per cent for the month ended June 30, 2008, was more or less in line with the market expectation. “The June IIP was in line with the consensus and our expectations and higher than the previous month’s revised 4.1 per cent year-on-year,” said Mr Tushar Poddar, Vice-President, Asia economic Research, Goldman Sachs. The IIP for the month of June was 4.1 per cent, which is 1.3 per cent lower than this month’s figure.

But, if the June figures are compared with what it was in the corresponding period last year, then it is a major decline. In June last year, this figure was as high as 8.9 per cent.

Booking profits

Marketmen said that investors today ignored the IIP figures as they were looking at booking profits, which is why the market dipped almost 300 points on Tuesday. “The markets are slightly overbought at the moment so what we saw today was investors booking profits at the high levels that the markets are at right now,” said Mr Sanjay Someshwar, a sub-broker at Ventura Securities.

Mr Alex Mathew, Head of Research at Geojit Financial Services, said along with profit booking, due to the overbooked market, people were being a little cautious before the SEBI meeting on Wednesday.

“If the KYC norms are implemented on the FIIs, our market might witness some more slowdown in FII inflow. Another reason could be that investors wanted to book profits before the long weekend coming up,” added Mr Mathew. Mr Poddar expects GDP to moderate to 7.8 per cent in FY-09 from 9 per cent in FY08, although the downside risks have increased. “However, with inflation still remaining well above the RBI’s target range, we continue to expect one more round of rate increases of 25 bps on the repo rate and 25 bps on the cash reserve ratio (CRR),” added Mr Poddar.

Uncomfortable level

Though inflation may not be rising at the pace, as it was a few months back, it is still at a rather uncomfortable level, said Mr Dharmakirti Joshi, Principal Economist, CRISIL.

“The impact of the softening of inflation rate will not impact the IIP numbers immediately,” he added. Market participants are of a mixed view of whether the IIP numbers will see an upward trend from here on Mr Joshi said that it would be difficult to maintain such IIP numbers.

Others feel that with the drop in the price of crude and the softening interest rates, the Government might do something about the high interest rates. Mr Someshwar is of the view that the most of the bad news in the economy has been discounted by the markets.

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