Wholesale Price Index


Published on

 Index that traces the relative changes in the price of an individual good (or a market
basket of goods) over time

 It is also substituted for the annual average inflation at times

 It gives an idea of the week-to-week fluctuations in the prices of all the traded
commodities in the country as a whole

 It is calculated for wholesale prices in which the quantities of the base year and
current year are different

  • Be the first to comment

Wholesale Price Index

  1. 1. Wholesale Price Index (WPI) Primer
  2. 2. Introduction
  3. 3. What is WPI?  Index that traces the relative changes in the price of an individual good (or a market basket of goods) over time  It is also substituted for the annual average inflation at times  It gives an idea of the week-to-week fluctuations in the prices of all the traded commodities in the country as a whole  It is calculated for wholesale prices in which the quantities of the base year and current year are different
  4. 4. Origin and History  The Office of the Economic Adviser to the Government of India undertook to publish for the first time, WPI with base week ended August 19, 1939, from the week commencing January 10, 1942  The index was calculated as the geometric mean of the price relatives of 23 commodities  These commodities were classified into four groups  Food & tobacco  Agricultural commodities  Raw materials  Manufactured articles  Each item was assigned equal weight  There was a single price quotation for each item  An important modification in the WPI was that in the ‘70-71 series, weights were assigned on the basis of the entire wholesale transactions and therefore the values of transactions of the non-selected commodities (which did not find place in the index) were assigned to those selected commodities whose nature and price trends were similar.  The base year of the WPI which commenced in India in week ending in august 1942 was revised to year ending august 1942, 1981-82  The current base year is 1993-94  The latest series includes three broad sectors namely,  Primary Articles  Fuel, Power, Light and Lubricants  Manufactured Products
  5. 5. Functions & Uses  It is used by the Reserve Bank of India and the Government of India to frame their monetary and fiscal policies and to take appropriate corrective steps during inflationary periods  It is also utilized for purposes like forecasting changes in business conditions indicating supply-demand relationships, deflating aggregates such as national income, etc  It is used by a number of departments of the Government of India, semi- government bodies, chambers of commerce, trade associations and private concerns  Conventionally, it has been used to measure the variations in exchange value or purchasing power of money  Other organizations like the Planning Commission, Department of Civil Supplies, Central Statistical Organization, base their various schemes on the price trends revealed by the index numbers of wholesale prices  Also used by some of the units in public and private sectors for the purpose of escalation clause in the supply of raw materials, machinery and construction work
  6. 6. Advantages & Disadvantages Advantages  It represents the wholesale trade transactions of all the commodities produced and traded in the system  It is available on a weekly basis with the least time lag  The traditional WPI is important in so far as it provides an economy- wide measure at the level of overall transactions in the economy with money as its numeraire  It is quite handy for purposes of comparisons Disadvantages  It is non-specific in nature for use by various agencies  It is not a proper measure for measuring inflation in the basket of final use commodities  It does not include the range of services which cater to both businesses and consumers thus they all tend to use a series which is not designed with their specific requirements
  7. 7. Construction Methodology
  8. 8. Index Calculation(1/4)  It is calculated on the principle of weighted arithmetic mean, according to the Lasperyre’s formula which has a fixed base-year weighting diagram operative through the entire life span of the series. I= Σ (Ii . Ri)/Σ Wi Where, I = Index Number of wholesale prices of a sub-group/group/major group/all commodities Wi = The weight assigned to the ith item/sub-group/group/major group. Ii = Index of the ith item/subgroup/group/major group  The weekly WPI at the time of its initial compilation and release is provisional as it does not take into account some of the price quotations that are received belatedly.  The prices of the missing quotations are either repeated or estimated depending on the nature of the commodity.  The provisional index is made ‘final’ after a period of eight weeks by which time almost all the required price quotations are expected to have become available.
  9. 9. Index Calculation(2/4)  The WPI Index is composed of three broad heads namely Manufactured Products, Primary Articles & Fuel, Power, Lights and Lubricants with weight 63.75%, 22.02 % and 14.23% respectively  Let us examine the detailed breakup of the Manufactured Products along with the indexed prices of each of the sub heads Description Base Price Current Price Price Relative(p) Avg. P(Ii) Wi Wi*Ii Coal Mining 117.67 1.75 205.93 Coking Coal 50 56 112 Non Coking Coal 56 65 116.07 Coke 48 58 120.83 Lignite 78 95 121.79 Mineral Oils 103.68 6.99 724.71 LPG 350 375 107.14 Petrol 48 49 102.08 Keros ene 15 12 80 Aviation turbine Fuel 850 1020 120 High s peed dies el oil 625 569 91.04 Light dies el oil 425 498 117.18 Naptha 536 592 110.45 Bitum in 658 689 104.71 Furnace oil 468 450 96.15 Lubricants 249 269 108.03 Electricity 121.67 5.48 666.73 Elec.(Dom es tic) 4 5 125 Elec(Com m ercial) 8 10 125 Elec(Indus try) 6 7 116.67 Elec(Railway Traction) 5 6 120 Sum 14.2 1597.38
  10. 10. Index Calculation(3/4)  Thus the manufactured products index stands at I = Σ (Ii . Ri)/Σ Wi = 1597.38/14.23 = 38.74  Similarly the Primary articles and the Fuel, Lights, Power and Lubricants index can be calculated and let us take their values as 52.26 and 85.96 respectively  Thus the value of WPI index for the week ‘x’ is equal to = Manufactured products Index + Primary articles Index + Fuel, Lights Index = 38.74+46.35+29.78 = 114.87  Now let us assume that the prices in each of the sub heads of the manufactured products index changes in the next week say ‘y’
  11. 11. Index Calculation(4/4) Description Base Price Current Price Price Relative(p) Avg. P(Ii) Wi Wi*Ii Coal Mining 129.04 1.75 225.82  Thus the new manufactured Coking Coal 50 60 120 products index value is Non Coking Coal 56 63 112.50 1614.73/41.2 = 39.16 Coke 48 82 170.83 Lignite 78 88 112.82  Corresponding value for the primary articles and fuel, Mineral Oils 103.64 6.99 724.46 lights index is at 46.63 and LPG 350 360 102.86 32.63 respectively Petrol 48 50 104.17 Keros ene 15 10 66.67  Thus the value of WPI index Aviation turbine Fuel 850 1200 141.18 is at the end of week ‘y’ High s peed dies el oil 625 558 89.28 stands at 39.16 + 46.63 + Light dies el oil 425 512 120.47 Naptha 536 568 105.97 32.63 = 118.42 Bitum in 658 698 106.08  Thus the Index has grown by Furnace oil 468 465 99.36 3.09% in week ‘y’ compared Lubricants 249 250 100.40 to its value in week ‘x’ Electricity 121.25 5.48 664.45  This signifies a growth in the Elec.(Dom es tic) 4 4.5 112.5 wholesale price in India Elec(Com m ercial) 8 11 137.5 Elec(Indus try) 6 7.5 125  For the week ended ‘Y’ the Elec(Railway Traction) 5 5.5 110 inflation rate in India is at Total 41.2 1614.73 3.09%
  12. 12. Salient features of the series with base 1993-94  The latest series contains 435 items in the commodity basket.  "Primary articles" contribute 98 items  "Fuel, Power, Light and Lubricants" 19 items  "Manufactured products" provide 318 items  Beverages, Tobacco & Tobacco Products and Machinery and Machine tools have considerably increased in terms of the number of commodities  The groups with a marginal increase are Textiles and Rubber & Plastics Products  However the Wood & Wood products and Paper & Paper Products remained constant in the terms of number of commodities  In all, there are 136 new items added in the revised series  Out of that, Primary articles account for 13, Fuel, Power, Light and Lubricants contribute 1, and Manufactured Products have 122 new commodities  The Group Machine and Machine Tools within Manufactured Products has the highest number of new commodities
  13. 13. Problems of Price data Collection System  It has happened very frequently that instead of wholesale prices, price data have been collected from sources as "producers’ prices" from manufacturing units.  The above prices correspond to farm-gate, factory-gate or mine-head prices  They at times refer to prices at the level of primary markets, secondary markets or other wholesale or even retail markets.  It is also the case that producers’ prices, other than in wholesale markets may contain significant components of transport and other allied costs which could move autonomously of the basic prices of commodities in question.  It is therefore recommended that a new system of data collection based on a network of centers spread throughout the country be put in place and linked through nodal centers by means of high speed computing and data transmission facilities with the assistance of the NIC.  It is difficult to collect wholesale prices from the market except contemporaneously and so it is difficult to conceive of collecting historical data from the market,  Therefore, the Working Group further recommends that the system of data collection may be started immediately with a view that this data base will be of invaluable use for future revision exercises.
  14. 14. Selection of Items & Source of Data  To ensure that the items in the index basket are as best representatives as possible, efforts are made to include all the important items transacted in the economy during the base year  In the existing WPI series, items, their specifications and markets have been finalized in consultation of with the Directorate of E&S (M/O Agriculture), National Horticulture Board, Spices Board, Tea board, Coffee Board and Rubber Board, Silk Board, Directorate Of Tobacco, Cotton Corporation of India etc  As there is a little scope of emergence of new commodities in the agriculture, the selection of new items in the basket is done on the basis of increased importance in wholesale markets  The inclusion and exclusion of mineral items, their grades, market centers etc. are taken on the suggestions of Indian Bureau of Mines  Specifications of coal, coke and lignite have been decided in consultation with the Department of Coal  The selection of petroleum products the Ministry of Petroleum is consulted and for electricity suggestions are taken from Central Electricity Authority  Regular time series data of organized manufacturing sector on value of production are available through Annual Survey of Industries covering factory sector  The criterion for selection of items has been based on the cut off traded value of a product during the base year which is 120 cr.  Selection of data sources for manufactured products is done on subjective sampling basis  For each item, a list of 10 major manufacturers/ producers is prepared and efforts are made to seek willing cooperation from the top five manufacturers for regular supply of weekly wholesale price quotations
  15. 15. Choice of base Year  The base year of a price index series has to be carefully chosen since the base year would have a considerable influence both on the movement of price relatives of the individual commodities and on the weighting pattern thus influencing the movement of the Index as a whole  The base year should be a normal year in respect of production and trade. The base year should be a normal year in respect of prices of commodities in general. The period at least should not be one representing abnormal prices and their fluctuations  Reliable price data may be available for the selected base year  The base year should be aligned with the base year of other important economic indicators and indices, such as national income series, other price series, etc  The base year should be as recent as possible so that by the time the revised series is released it has not outlived its utility  The current base year which is 1993-94 should be revised to 2004-05 because a base year so old does not have any significance
  16. 16. Understanding WPI
  17. 17. WPI – A Myth(1/2)  WPI should not be considered as a measure for inflation since it has many flaws because the price spread information is not even because the subscribed number of price quotation to be received for assessing changes in WPI is 1918 quotations, whereas Indian agencies responsible for calculating WPI receive not more than 1200 quotations  Two-thirds of the price quotations are sourced from only four metros. Price reporting by manufacturers is voluntary and often not forthcoming  Service sector accounts for 55% of GDP but they are not duly accounted in WPI  Services such as rail and road transport, health care, education, postal, banking and insurance, for example, are not part of the WPI basket  Scrutiny of data by the collection agency is lax  Transparency is lacking with respect to pricing data and index computation
  18. 18. WPI – A Myth(2/2)  The items that are considered for the WPI and their respective weights were fixed back in 1999- 2000 and have not been revised since then though there have been major changes in the economy over the last decade  The products of the unorganized sector that are estimated to constitute about 35% of the total manufactured output of the country are not part of 'WPI basket'  The index thus falls well short of being a broad based indicator of the price level even in its construction  There is a huge difference between the provisional and final index figure and it is sometimes more than 100 basis points difference between them which is not acceptable for such a sensitive index  Out of 435 commodities, more than 100 commodities are unimportant from consumer point of view so their price changes does not really affect the consumers
  19. 19. Difference between CPI and WPI  WPI essentially measures the price changes from the production side and not from the consumption side and hence it is a lop sided viewpoint of consumers  WPI measures inflation at each stage of production while CPI measures inflation only at the final stage of production thus bringing a calculation fallacy in WPI through double counting  WPI does not reflect the actual price hike, which the consumer is paying because it measures the general level of price changes at the level of either the wholesaler or at the producer and does not take into account retail margins  WPI gives very little weightage to the food component which actually is one of the most important component of CPI
  20. 20. Corrections to be made  A new WPI series is supposed to be out in October,2009  It is expected that the base of the series will be revised from 1993-94 to 2004-05  It is suggested that attempt should be made to set up a network of data collection system with the help of NIC, and data should be sourced from wholesale markets as far as possible  The wholesale transactions that are to be used to determine the prices that go into the index are not precisely specified.  Service sector constitutes nearly one-half of the economy and and is increasing in importance. Thus, a separate exercise may be undertaken to develop a price index for services sector.  The weights of the various components should be restructured  Importance or weightage of food-articles should be increased  It should include seasonally adjusted data  It should use quarter-to-quarter or month-to-month changes instead of year-on-year ones
  21. 21. Story behind a falling WPI......  Most economies like US, UK, Japan, China, France, Singapore etc uses CPI as the official measure to calculate inflation  But India uses WPI as the official measure of inflation  Food accounts for 53 per cent of the average rural Indian's and 40 per cent of the average urban Indian's monthly expenditure  The poorer the family, the higher is the proportion of budget on food, and greater the impact  Food prices have sky-rocketed in previous few months  In this context, it is astonishing that WPI is zero or negative  It is happening due to meager contribution of food articles in WPI  While CPI is showing high figures because it has a high weightage of food articles  The government's obsession with WPI clearly shows a strong bias towards the interests of business to the virtual neglect of the interests of the common man  The WPI 'basket' is clearly far removed from any consumers 'basket' and meant only as an indicator of a change in the general level of prices in the economy
  22. 22. CPI at its best yet WPI; a measure of inflation  Government has a problem in choosing among the five measures of inflation—one wholesale price index and four consumer price indexes  WPI is often seen as a comfortable tool to take measure against price rise by the policy makers as it gives direction before the commodity actually hits the market  The different CPI's are-CPI for urban non-manual employees (CPI-UNME) CPI for industrial workers (CPI-IW), for agricultural laborers (CPI-AL) and for all rural laborers  Each CPI series is meant to reflect the cost of living for a homogenous group of consumers  The inflation as measured by the CPI-AL and CPI-IW is extremely important for another reason - it is used in arriving at the official poverty line  The poverty line identifies the families that will have access to government subsidies; underestimation of inflation denies access to families who should legitimately be covered.  All 4 CPI indexes do not provide a true and accurate picture of inflation because of the lack of care of the government to keep them up to date by reflecting changes in the consumer expenditure patterns.
  23. 23. Budget Deficit and Inflation (1/2) • In the latest budget the government has spent heavily and has lead to a problem of aggravating budget deficit • Fiscal deficit as a percentage of GDP is projected at 6.8% compared to 2.5% in B.E. 2008-09 and 6.2 per cent as per provisional accounts 2008-09 • This increase in fiscal deficit combined with the state deficit takes the total deficit to a level of around 13% • The funding of this high deficit also causes an upward movement of the general price levels in the system and leads to inflation • This depends on the ways in which the government tackles the deficit problem • The next slides gives an analysis of impact of deficit on inflation
  24. 24. Budget Deficit and Inflation (2/2) Mechanism Method of Paying for Effect on Balance of Effect on Prices Causing Inflation? the Deficit Payments Foreign Currency Attract foreign currency Made worse because Prices increase Yes Deposits deposits by higher amount of because interest increasing the interest has to be rates in whole rate of interest paid country increase correspondingly and cost of investment and of working capital increases Foreign Debt Long-term borrowing of Made worse because Prices increase as Yes foreign capital regular interest costs increase payments and because of capital additional repayments have taxation to pay to be made the interest and to pay off the loan Money in Circulation* Print more money   Prices increase Yes because each note (money unit) is now backed by less, is worth less so that its purchasing power is less *This is the tool which government is using currently, which will lead to a rising price levels
  25. 25. WPI & Currency • High WPI leads to an Rising WPI Leading erosion in the currency's Inflation & Currency Movement to a Weakening value 15 Rupee 54 • It results in the loss of 13.5 12 50 purchasing power of the 10.5 currency and thus 9 7.5 46 depreciation of the USDINR 6 42 WPI 4.5 currency 3 38 • Thus it means that the 1.5 0 34 currency depreciates in -1.5 -3 30 relation to the currency Jan-06 Jun-07 Mar-07 Jan-08 Mar-09 Jun-09 Nov-08 Nov-06 Sep-07 Apr-06 Apr-08 Aug-06 Aug-08 of other countries • This leads to a Time weakening performance WPI INR of the sectors which are import depended and boost for the companies which export
  26. 26. WPI & Interest Rates • A very high inflation leads to a contractionary monetary policy by the Reserve bank of India • This leads to a reduction in the total money supply in the system which results in the upward movement of the interest rates • The rationale behind the hike in interest rates is that it reduces the money demand and hence the demand for goods and services, because inflation is mainly an outcome of too much money chasing too few goods • Thus with the hike in interest rates consumption demands partly switches to investment demand and leads to a reduction in inflation • This hike in interest rates have a double impact on corporate profitability lower profitability of the corporate because – Higher cost of capital and – Lower realizations because of a reduction in the demand for their products
  27. 27. WPI Constituents
  28. 28. Primary Articles  Goods that are sold (for consumption or The components of Primary articles production) just as they were found in nature Minerals ,  For e.g.: oil, coal, iron, and agricultural 0.48% products like wheat or cotton Non-Food Articles ,  It has a weightage of 22.02% in the WPI 6.14% which is the second highest  It consists of 98 items  The 3 sectors of primary articles are Food Articles, 15.40% further sub-divided into groups and sub- groups  Food has a very small weightage in Primary articles
  29. 29. Fuel, Power, Lights & Lubricants The Components of Fuel,Power,Lights & Lubricants  It has the least contribution in WPI  It has a weigtage of only 14.23 Coal Mining, 1.75%  This segment consists of major items Mineral Oils , 6.99%  They are fuel, power, lights and Electricity, lubricants 5.48%  As we can see this segment is a mixture of many varied products  It consists of 19 items
  30. 30. Manufactured Products Manufactured Products Weights (in%)  Manufactured products are goods that have Chemical Products 11.93 been processed by way of machinery Food Products 11.54  They include intermediate as well as final Textiles 9.8 goods Machinery & Machine Tools 8.36  For e.g. bakery products, dairy products, edible oil, etc. Basic Metal, Alloys & Metal Products 8.34  Manufactured Products is the segment which has the highest contribution in the Transport Equipment & Parts 4.29 WPI Non-Metallic Mineral Products 2.52  It has a weightage of 63.75% in the WPI  It consists of 318 items Plastic & Plastic Products 2.39  It has 12 sectors under it which have been Paper & Paper Products 2.04 sorted according to their weightage in the manufactured products Beverages & Tobbaco Products 1.34 Leather & Leather Products 1.02 Wood & wood Products 0.17
  31. 31. Inflation and Impact on Sectors
  32. 32. Sensitive Sectors • There are certain sectors in the industry which are sensitive to Sectors fluctuations in the interest-rates which in turn occurs due to persisting Real Estate inflation or deflation in the economy Infrastructure • The above occurs because heavy capital investment is required in these Automobiles sectors • The amount of investment depends Banking & Finance on the lending rates offered by the banks Cement • If the rates are high the investment slows down and vice-versa Capital Goods • Some of the sectors affected by the scenario are listed beside and their details are given in next slides
  33. 33. Realty Sector  With interest rate coming down coupled with valuations being attractive, several The top 5 companies fund houses have increased their exposure in the realty sector D L F Ltd • FM has announced a subsidy of 1% on home loan up to Rs.I0 lakh when the Unitech Ltd overall cost of the house does not exceed Rs 20 lakh. This could benefit realty firms Housing Development & • Another measure that that could provide a Infrastructure Ltd boost to the realty sector the government has allowed developers of housing Indiabulls Real Estate Ltd projects a tax holiday under section 80 IB(10) of the Income Tax Act on profits Anant Raj Inds. Ltd from projects approved between 1 April 2007 and 31 March 2008 • The benefit is subject to a condition that the projects are completed on or before 31 March 2012 • The top 5 companies in this sector are sorted in a decreasing order according to their market cap
  34. 34. Event Analysis Realty & WPI 0.00 High interest- 14.00 rates caused realty 12.00 -20.00 to fall 10.00 8.00 -40.00 6.00 (%) (%) -60.00 4.00 2.00 -80.00 0.00 -2.00 -100.00 -4.00 May-09 Nov-08 Feb-09 Oct-08 Jan-09 Mar-09 Jun-09 Jul-08 Sep-08 Aug-09 Aug-08 Apr-09 REALTY WPI
  35. 35. Infrastructural Sector  A huge capital investment is required in this sector which depends on the interest- The top 5 companies rate prevailing in the market  The falling interest-rates have provided Jaiprakash Associates Ltd the much needed boost attracting inflows of capital Lanco Infratech Ltd  Government also has provided support from its side by announcing stimulus I V R C L Infrastructures & packages Projects Ltd  The Finance Minister has announced tax breaks for industrial park schemes and Hindustan Construction Co. road projects to stimulate the economy Ltd and lift growth to 8-9 percent by the end of 2010 Nagarjuna Construction Co.  The government has also extended tax Ltd holiday to developers of industrial parks by two years until March 2011  The top 5 companies in this sector are sorted in a decreasing order according to their market cap
  36. 36. Event Analysis Infrastructure & WPI Did not perform well 200.00 because of economic 14.00 150.00 slowdown 12.00 10.00 100.00 8.00 50.00 (%) 6.00 (%) 0.00 4.00 -50.00 2.00 0.00 -100.00 -2.00 -150.00 -4.00 Jan-08 Feb-08 Jun-08 Dec-08 Jun-09 Mar-09 May-09 Feb-09 Jul-08 Oct-08 Sep-08 Apr-08 INFRASTUCTURE WPI
  37. 37. Automobiles Sector • This sector's growth depends on the disposable income of the consumers The top 5 companies which is in turn affected by inflation • After two decades of impressive Tata Motors Ltd growth, the automobile sector’s performance has not been Maruti Suzuki India Ltd encouraging after 2006-07, but its growth turned modestly positive last Hero Honda Motors Ltd fiscal, and in 2008-09, the industry has witnessed a modest growth of Bajaj Auto Ltd 3% • Almost all the big-wigs of auto-sector Mahindra & Mahindra Ltd have reported a decent profit • The top 5 companies in this sector are sorted in a decreasing order according to their sales value
  38. 38. Event Analysis Auto & WPI Auto sector at its 150.00 peak due to low 14.00 interest-rate 12.00 100.00 10.00 8.00 50.00 (%) 6.00 (%) 0.00 4.00 2.00 -50.00 0.00 -2.00 -100.00 -4.00 Jan-06 Nov-06 Feb-07 Jun-07 Nov-08 Mar-09 Jun-09 Jan-08 Jul-06 Sep-07 Apr-06 Aug-08 AUTO Apr-08 WPI
  39. 39. Banking & Finance The top 5 non-banking financial institutions The top 5 banks Housing Development Finance State Bank Of India Corpn. Ltd I C I C I Bank Ltd Reliance Capital Ltd H D F C Bank Ltd Infrastructure Development Finance Co. Ltd. Axis Bank Ltd Kotak Mahindra Bank Ltd Shriram Transport Finance Co. Ltd L I C Housing Finance Ltd  With interest rate coming down coupled with valuations being attractive, several fund houses have increased their exposure in the banking sector in April compared to March 2009  Banking stocks jumped on hopes falling interest rates will boost lending growth  Almost all the banks have made a neat profit  Bankex, banking index of BSE increased to 0.67% in August compared to 6.88% in May  The top 5 banks and non-financial institutions are sorted in a decreasing order according to their market cap
  40. 40. Event Analysis Bankex & WPI High inflation (interest-rate) caused Bankex to be 150.00 low 14.00 12.00 100.00 10.00 50.00 8.00 6.00 (%) (%) 0.00 4.00 2.00 -50.00 0.00 -2.00 -100.00 -4.00 Jan-06 Jul-06 Mar-09 Nov-06 Feb-07 Nov-08 Jun-07 Jan-08 Jun-09 Sep-07 Apr-06 Apr-08 Aug-08 BANKEX WPI
  41. 41. Cement • A 4% cut in excise duty, sharp correction in imported coal, petcoke and crude oil prices by 67.8%, 49% and 66% respectively from their peak levels have The top 5 companies reduced cost pressures from the cement industry Binani Cement Ltd • Softening of intrest-rates would reduce the intrest-rate burden of small cement players Ambuja Cements Ltd • The correction in sea freight has further reduced the landing cost of imported coal A C C Ltd • Reduction in crude oil prices has led to a saving in packing cost and cut in domestic Grasim Industries Ltd diesel prices • All the above components of the cement division has made it intrest-sensitive Ultratech Cement Ltd and has contributed in reducing its production cost • The top 5 companies in this sector are sorted in a decreasing order according to their sales value
  42. 42. Event Analysis Trickledown effect of Cement & WPI poor performing realty and infra sector 150.00 14.00 12.00 100.00 10.00 8.00 50.00 6.00 (%) (%) 0.00 4.00 2.00 -50.00 0.00 -2.00 -100.00 -4.00 Jan-06 Jul-06 Mar-09 Nov-06 Feb-07 Jun-07 Jan-08 Nov-08 Jun-09 Sep-07 Apr-06 Apr-08 Aug-08 CEMENT WPI
  43. 43. Capital Goods  That investment by firms in The top 5 companies capital goods is highly sensitive to fluctuations in real Larsen & Toubro Ltd interest rates  The sensitivity of investment Mahindra & Mahindra Ltd in capital is high because of low capital depreciation rates Escorts Ltd  Companies in this sector are not performing well Tractors & Farm Equipment  Due to monsoon deficit this Ltd year the sale of tractors have really slowed down Kirloskar Oil Engines Ltd  After some disappointing performances the IIP figure in June for this sector stood at a modest 11.4%  The top 5 companies in this sector are sorted in a decreasing order according to their sales value
  44. 44. Event Analysis WPI is an all time Capital & WPI high because of both demand-pull & cost- push inflation 200.00 14.00 150.00 12.00 10.00 100.00 8.00 6.00 (%) (%) 50.00 4.00 0.00 2.00 -50.00 0.00 -2.00 -100.00 -4.00 Nov-06 Feb-07 Nov-08 Jan-06 Jun-07 Jan-08 Mar-09 Jun-09 Jul-06 Sep-07 Apr-06 Aug-08 Apr-08 Low investment caused this CAPITAL WPI sector to perform badly
  45. 45. Disclaimer: This document is for private circulation only. Neither the information nor any opinion expressed constitutes an offer or any invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (“related investment”). Kredent Brokerage Services Limited (KBSL) or any of its Associates or employees does not accept any liability whatsoever direct or indirect that may arise from the use of the information herein. KBSL and its may trade for their own accounts as market maker, block positioner, specialist and/or arbitrageur in any security of this Issuer(s) or in related investments, and may be on the opposite side of public orders. KBSL, its affiliates, directors, officers, employees and employee benefit programmers may have a long or short position in any securities of this Issuer(s) or in related investments. No matter contained herein may be reproduced without prior consent of KBSL. While this report has been prepared on the basis of published/other publicly available information considered reliable, we are unable to accept any liability for the accuracy of its contents.