IIP gets closer to 5% mark for April: Angel Broking

Views of Mr. Jaikishan J Parmar (Research Analyst, Angel Broking):

"The Index of Industrial Production (IIP) for the month of April 2018 came in at 4.9% for the month of April. Within the overall gamut of IIP, mining and manufacturing grew at 5.1% and 5.2% respectively while electricity grew at a more modest rate of 2.1%.

The rise in IIP appears to be more widespread this time around with 16 out of the 23 sectors showing positive growth for the month of April 2018. Some of the major positive contributions came from mining, scientific instruments, commercial vehicles, sugar and cement. The big negative contributions came from jewelry, copper bars, telephones, ready-made garments and air filters. In terms of use based classification, the big takeaway is that there is a 13% growth in the capital goods, which is signalling of a revival in the capital cycle.

What does this mean for the rate cycle in India. Firstly, with IIP back to near the 5% mark, the worries of the MPC that higher rates may curb IIP growth may be out of place. Also the IIP at 4.9% needs to be seen in the light of the the CPI inflation for May coming in at 4.87% which is largely in line with the MPC line of thinking that inflation may be headed higher post the Kharif season. That will only imply that further rate hikes from the MPC may be on the anvil."

Source : Equity Bulls

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