Weak IIP numbers for the month of October have disappointed market men leading to a steep fall in the market indices. Both the BSE and the NSE lost 2.1 per cent each owing to the IIP numbers, which were at a two-year low.

The Index of Industrial Production for the month of October stood at 158.1, down from 163.5 from last month, and from 166.6 in the corresponding month last year.

“With the base increasing since last October, the numbers were expected to be around 164 or 165, still lower than the October 2010 figures. But a sharp decline to 158.1 has really taken us by surprise,” said Mr Sunil Jain, Vice-President – Equity Research, Nirmal Bang.

“As expected, manufacturing segment impacted the overall IIP growth. The fall of about 26 per cent year-on-year in capital goodss was steeper than expected. The overall economic slowdown, higher interest rates and weak global scenario impacted growth,” said Mr Dipen Shah, Head- Fundamental Research, Kotak Securities.

Analysts say that the IIP numbers are expected to go from bad to worse in the coming days considering the negative growth outlook leaving the markets range-bound. “The mood in the market may not change unless there is some interest rate action by the RBI,” said Mr Sudip Bandyopadhyay, MD & CEO, Destimoney Securities.

According to Emkay Global, “From the market stand point, the negative output growth surprises will likely impact both earnings growth outlook and multiples. We believe, what might surprise the market are disappointments on top line growth, which may continue to feed into weakening net profits.”

But some see now Reserve Bank of India to shedding its hawkish stance.

“The data is likely to be a cause of concern for RBI. We expect the central bank to keep rates on hold and significantly moderate its hawkish stance in the forthcoming policy meeting. Meanwhile, given huge liquidity deficit, a CRR cut cannot be completely ruled out,” said Edelweiss.

However, Nomura said: “Although economic activity is likely to weaken in the months ahead, we believe inflation will remain the Reserve Bank of India's (RBI) primary concern. We expect core inflation to remain high in November (released on 14 December), hence we expect the RBI to stay on hold at its 16 December meeting.”

sneha.p@thehindu.co.in

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