Industrial production growth of 0.5% in November 2018, which fell from 8.4% in October 2018, was the lowest recorded since June 2017. The manufacturing sector has recorded a contraction by 0.4%, its worst performance since June 2017. The non-manufacturing sector — mining and electricity — despite recording positive growth, visibly decelerated, brokerage Anand Rathi said in a research note.
What it means
The equity market sentiments, which are already strained, might further get frayed with this unexpected contraction of Index of Industrial Production (IIP) growth figures, the brokerage noted. But it anticipates a policy rate-cut which will turn out to be good for the bond market.
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Why did the growth slump?
The massive slump from 8.5% in November 2017 is being linked to the “Diwali effect”. The festive season, spread through November last year, brings a contraction in manufacturing sectors which is one of the main reasons for the slow growth, according to the note. The festive season accounts for a large number of non working days that translates to low growth momentum.
Which Industry areas are affected?
The worsening industrial performance has been across-the-board, the brokerage said in the note. A cause for concern has been a downward growth trend observed in segments such as infrastructure, non durables and intermediates. Out of these, non durables goods have performed worst of the lot with growth slumping from 23.7% in November 2017 to -0.6% in November 2018. Primary, capital and durable goods are relatively stable with growth of primary goods falling only by 0.1%, from 3.3% in November 2017 to 3.2% in November 2018. Against the previous month of October 2018, the worsening is most marked by capital goods and durables.
By Sania Ashraf
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Source: Financial Express