BPPG response - Options for Defined Benefit schemes - 19Apr24.pdf
Iip+cpi
1. May 13, 2016
• IIP grew by marginal 0.1% in March led by poor manufacturing
• Manufacturing growth remained sluggish at (-)1.2%, the fourth contraction in output over the
last five months
• Mining output declined in March, while electricity sector witnessed double digit growth
• Consumer durables sector witnessed 8.7% growth validating the strong urban consumption
sentiments
• Capital goods further recorded contraction indicating weak investments scenario
• IIP growth for FY16 was 2.4% compared to 2.8% in FY15.
• CPI inflation rose to 3-month high of 5.4% in April, higher than the market expectation of 5.1%
• High prices of food articles include pulses, sugar and vegetables attributed to high CPI inflation
• We expect that RBI to keep interest rate unchanged in the coming monetary policy in June
Poor performance of manufacturing dragged down IIP growth: Indicating that growth momentum in
the economy remains vulnerable, Indian industrial output, measured by the Index of Industrial
Production (IIP), grew by marginally 0.1% YoY in March as compared to 2% (revised) in February and
2.5% in the same month of previous year. Subdued IIP growth was mainly attributed to the declined
manufacturing sector, which accounts for around 75% of the index. During FY16, factory output
growth remained at 2.4% compared to 2.8% in the FY15. Manufacturing conditions are not improving
in the country as the sector posted fourth contraction in output over the last five months. In terms of
industries, 12 out of the 22 industry groups in the manufacturing sector have shown positive growth.
Beside manufacturing, mining output also contracted (-)0.1%, however double digit growth in
electricity (11.3%) helped the IIP to show positive growth in the reported month. (Use based
classification) the output of capital goods sector, a measure of investment activities in economy,
contracted by (-)15.4% in the reported month compared to (-)9.5% growth in January. This was the
fifth straight contraction in output indicating weak investment scenario in the economy mainly due to
the weak private sector sentiments. However, consumer durables sector grew by 8.7% in March,
mainly on the back of strong urban demand.
April CPI inflation rose to 3-month high of 5.4%: Consumer price index (CPI) or retail inflation rose to
a three month high at 5.4% YoY in the month of April as compared to 4.8% (final) in March. The
upsurge in inflation was driven by high food prices as Consumer Food Price Index (CFPI), which
represents around 48% weight in CPI index, rose to 6.3% in April from 5.2% in the previous month. The
prices of pulses which rose by 34% remained the major contributor to the food inflation, while
vegetable and sugar prices also rose to 4.8% and 11.2% as compared to 0.5% and 3.9% in the previous
month. Country is facing drought like situation in many states which is adversely impacting the
agriculture production. Retail inflation in rural areas rose 6.1%, while in urban areas it grew 4.7%. CFPI
inflation recorded at 6.6% for rural area compared to 6.0% in the urban area.
Outlook: IIP at 0.1% during March and CPI at 5.4% in April came as a double setback for the Indian
economy. IIP, which reflects subdued growth in the economy demand some initiatives like interest
rate cut or policy measures, but higher CPI, above 5% target for FY17, requires RBI to reduce liquidity
in the banking system. Meanwhile, easing interest cycle has started positive influence as there is some
visibility of revival in demand scenario as consumer durables grew by 11.2% in FY16 compared to
(-)12.6% in FY15. Though this improvement was mainly driven by urban region as subdued country’s
agricultural sector weighed on rural consumption. Concerns have also arisen over near term inflation
outlook as some parts of the country are facing drought situation. The RBI will observe this situation
closely as the present drought conditions in Maharashtra and other parts with very low reservoir
levels can lead to pressure on some products’ prices even if the monsoon remains normal. Given the
prevailing difficult conditions, the RBI is likely to keep interest rate unchanged in the next scheduled
policy meet on June. The IMD's has forecasted an above-normal monsoon which would boost rural
sector demand and will help to arrest the sustained sluggishness in industrial production.
Overall, we are of the view that easing interest rate scenario, contained inflation and enhanced
government’s focus on rural sector and infrastructure development will positively reflect in industrial
output growth going forward.
IIP, CPI
Industrial growth unexpectedly declines to 0.1%; CPI inflation rises
Source: MOSPISEBI Registered – Research Analyst www.choiceindia.com *Please Refer Disclaimer on Website
Monthly Economic Update
Research Analyst
Satish Kumar (022-6707 9913)
Satish.kumar@choiceindia.com
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
IIP Trend
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Manufacturing Core Sector
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
Jan'15
Mar'15
May'15
Jul'15
Sep'15
Nov'15
Jan'16
Mar'16
CPI Inflation trend
2. Source: MOSPISEBI Registered – Research Analyst www.choiceindia.com *Please Refer Disclaimer on Website
Monthly Economic Update
YoY Sectoral Performance Use-Based Classification
IIP Mining Manufacturing Electricity Basic Capital Intermediate Durables Non-Durables
Index Weight 100.0% 14.2% 75.5% 10.3% 45.7% 8.8% 15.7% 8.5% 21.4%
Mar'16 0.1% -0.1% -1.2% 11.3% 4.0% -15.4% 3.7% 8.7% -4.4%
Feb'16 2.0% 5.0% 0.7% 9.6% 5.4% -9.8% 5.7% 9.7% -4.2%
Mar'15 2.5% 1.2% 2.7% 2.0% 2.6% 9.1% 2.8% -4.6% 1.9%
Cumulative Growth
Apr-Mar FY16 2.4% 2.2% 2.0% 5.6% 3.5% -2.9% 2.5% 11.2% -1.7%
Apr-Mar FY15 2.8% 1.4% 2.3% 8.4% 6.9% 6.3% 1.7% -12.6% 2.8%
Snapshot of CPI Inflation
% (YoY) Apr’16 Mar’16 Feb’16 Jan’16 Dec’15 Comments
Food, beverages 6.2 5.2 5.5 6.7 6.3 Sharp increase led by high prices of fruits, vegetables and pulses
Cereals and products 2.4 2.4 2.2 2.2 2.3
Pulses and products 34.1 34.1 38.5 43.3 45.8 Pulses remained the largest contributor to CPI index
Meat and Fish 8.1 7.7 7.3 8.2 6.7
Milk and milk products 3.3 3.3 3.7 3.9 3.9
Fruits 1.7 -1.1 -0.7 -0.4 0.7 Fruits prices bucked the three month declining trend
Vegetables 4.8 0.5 0.7 6.4 4.4
Non-alcoholic beverages 34.1 4.2 4.2 4.6 4.5
Sugar and Confectionary 11.2 3.9 0.5 -1.6 -6.1
Sugar prices rose for the fourth consecutive month due to supply crunch in the global
market
Clothing and footwear 5.6 5.5 5.6 5.7 5.7
Housing 5.4 5.6 5.3 5.2 5.1
Fuel and light 3.0 3.5 4.6 5.3 5.4 Inflation was mainly driven by declined crude oil prices
Pan, tobc. and intoxicants 8.0 8.5 8.5 9.0 9.3
CPI 5.4 4.8 5.3 5.7 5.6 CPI inflation in April was driven by high food product s prices
CFPI 6.3 5.2 5.3 6.9 6.4
Industry wise break‐up of the manufacturing sector
YOY Growth Rate (%) Mar'16 Feb'16 Jan'16 Dec'15 Nov'15 Oct'15
Food products and beverages -15 ‐6.2 ‐1.9 ‐3.4 ‐1.6 ‐0.9
Tobacco products 19.8 13.9 2.9 ‐8.2 4 5.3
Textiles -1.1 4.7 3.8 5.3 ‐3.1 9.6
Wearing apparel; dressing and dyeing of fur 16.9 ‐8.5 ‐1.7 0.6 4.4 6.5
Luggage, handbags, saddlery, harness & footwear; -5.6 -6.9 -9.4 ‐7.5 ‐8.0 17.7
Wood and products of wood & cork except furniture; 2.7 -2.7 -1.7 ‐1.0 ‐11.0 13.7
Paper and paper products -0.5 5.3 3.9 2.8 5.5 6.5
Publishing, printing & reproduction of recorded media -9.9 ‐7.9 ‐12.7 ‐10.7 ‐11.5 ‐10.2
Coke, refined petroleum products & nuclear fuel 11.2 9.8 6.6 3 5.4 ‐2.9
Chemicals and chemical products 2.2 2.1 ‐2.0 2.2 ‐0.4 16
Rubber and plastics products 1 1.2 ‐3.5 1 ‐2.8 8
Other non‐metallic mineral products 8.2 11 6.1 0.4 ‐4.6 7.1
Basic metals -0.9 0.1 ‐4.6 ‐5.3 0.6 ‐2.3
Fabricated metal products -7.7 17.2 5.7 ‐4.0 ‐6.8 13.9
Machinery and equipment n.e.c. -3.8 11.1 2.9 ‐5.1 ‐6.7 13.1
Office, accounting & computing machinery 10.4 37.9 41 17.5 11.8 48.4
Electrical machinery & apparatus n.e.c. -36.2 ‐47.1 ‐50.3 ‐44.9 ‐46.6 23.2
Radio, TV and communication equipment & apparatus 36.5 15.6 22.4 82 9.7 47.5
Medical, precision & optical instruments, 13.6 20.4 -11.5 3.6 ‐8.3 ‐6.8
Motor vehicles, trailers & semi‐trailers 12.3 5.8 3.7 11.5 ‐6.4 17.6
Other transport equipment -0.6 11.8 0.8 ‐1.6 ‐9.3 7.8
Furniture; manufacturing n.e.c. 12.3 27.9 16.3 16.6 102.3 138.9
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Indian Industrial Production
Mining Manufacturing Electricity IIP
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
Rural CPI Urban CPI CFPI
3. SEBI Registered – Research Analyst www.choiceindia.com *Please Refer Disclaimer on Website
Monthly Economic Update
Choice’s Rating Rationale
The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a
stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next
12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least
5% over the next 12 months. Stocks between these bands are classified as Neutral.
Institutional Equity Team
Name Designation Email id Contact No.
Ajay Kejriwal President ajay@choiceindia.com 022- 6707 9850
Sumeet Bagadia Head of Research sumeet.bagadia@choiceindia.com 022 - 6707 9830
Amit Singh VP - Institutional Sales amit.singh@choiceindia.com 022 - 6707 9920
Devendra Gaikwad Sr. Manager - Institutional Sales devendra.gaikwad@choiceindia.com 022 - 6707 9877
Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com 022 - 6707 9912
Satish Kumar Research Analyst satish.kumar@choiceindia.com 022 - 6707 9913
Kunal Parmar Research Associate kunal.parmar@choiceindia.com 022 - 6707 9982
Amit Pathania Research Associate amit.pathania@choiceindia.com 022 - 6707 9979
Vikas Chaudhari Research Associate vikas.chaudhari@choiceindia.com 022 - 6707 9988
Anish Vyas Sr. Research Associate anish.vyas@choiceindia.com 022 - 67079915
Sahil Nandkumar Research Associate sahil.nandkumar@choiceindia.com 022 - 67079914
Vishal More Research Associate vishal.more@choiceindia.com 022 - 67079916
Trirashmi Ghoderao Research Advisor trirashmi.ghoderao@choiceindia.com 022 - 6707 9972
Neeraj Yadav Research Advisor Neeraj.yadav@choiceindia.com 022 - 6707 9988
Disclaimer
This is solely for information of clients of Choice Broking and does not construe to be an investment advice. It is also not intended as an offer or solicitation for
the purchase and sale of any financial instruments. Any action taken by you on the basis of the information contained herein is your responsibility alone and
Choice Broking its subsidiaries or its employees or associates will not be liable in any manner for the consequences of such action taken by you. We have
exercised due diligence in checking the correctness and authenticity of the information contained in this recommendation, but Choice Broking or any of its
subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in
the information contained in this recommendation or any action taken on basis of this information. This report is based on the fundamental analysis with a view
to forecast future price. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views
about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to
specific recommendations or views expressed in this report. Choice Broking has based this document on information obtained from sources it believes to be
reliable but which it has not independently verified; Choice Broking makes no guarantee, representation or warranty and accepts no responsibility or liability as
to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are
subject to change without notice. The information and any disclosures provided herein are in summary form and have been prepared for informational
purposes. The recommendations and suggested price levels are intended purely for stock market investment purposes. The recommendations are valid for the
day of the report and will remain valid till the target period. The information and any disclosures provided herein may be considered confidential. Any use,
distribution, modification, copying, forwarding or disclosure by any person is strictly prohibited. The information and any disclosures provided herein do not
constitute a solicitation or offer to purchase or sell any security or other financial product or instrument. The current performance may be unaudited. Past
performance does not guarantee future returns. There can be no assurance that investments will achieve any targeted rates of return, and there is no guarantee
against the loss of your entire investment.
POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement – • Analyst interest of the stock /Instrument(s): - No. •
Firm interest of the stock / Instrument (s): - No.
Choice Equity Broking Pvt. Ltd.
Choice House, Shree Shakambhari Corporate Park, Plt No: -156-158,
J.B. Nagar, Andheri (East), Mumbai - 400 099.
+91-022-6707 9999
+91-022-6707 9959
www.choiceindia.com
Satish Kumar
Digitally signed by Satish Kumar
DN: cn=Satish Kumar, o=Choice Equity
Broking Pvt. Ltd., ou=Research Analyst,
email=satish.kumar@choiceindia.com,
c=US
Date: 2016.05.13 16:13:29 +05'30'