 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

1. Wholesale Price Index
(WPI)
Primer

2. Introduction

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. 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. 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. 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. Construction Methodology

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. 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. 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. 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. 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. 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. 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. 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. Understanding
WPI

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. WPI
Constituents

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. 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. 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. Inflation and
Impact on
Sectors

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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