IIP growth for the month of February came in at 7.1%. The good news was that Manufacturing continues to grow at 8.7% even as electricity slowed down and mining saw negative growth. The return to growth in the manufacturing sector is probably the one good news that has come from IIP in the last few months and promises to sustain GDP above the 7% mark for the coming fiscal year. In terms of user based classification, capital goods grew by 20% while infrastructure goods grew by 12.8% giving hopes of a bottoming out of the capital investment cycle.
The CPI inflation for the month of March 2018 came in lower at 4.28% compared to 4.45% in the month of February. The fall in inflation was largely driven by food inflation weakening by almost 55 basis points on a MOM basis. The sharp fall in food inflation can be attributed to the tempering of vegetables inflation and cereals inflation. Pulses inflation continued to remain in negative territory while the real fall in inflation came from negative inflation in sugar due to a supply glut. Of course, the RBI will still be keen to watch the monsoons, Kharif output and the trajectory of oil prices.
You could call it the revenge of the cryptos but Bitcoin has bounced by 10% with a bang to scale the $7600 mark. Bitcoin, it may be recollected has lost nearly 70% since it touched a peak of $19,400 in the early part of this year. While the real reasons for the sharp rise were not clear, there was obviously some buying interest in buying cryptos since large investors do expect that the trade war and tensions in Syria could seriously impair fiat currencies like the Dollar and Yuan. While gold will still be a safe haven, Bitcoin is a lot more volatile and hence is more attractive to traders.
In a move that has put the NSE in a piquant situation; the Singapore Exchange (SGX) has announced plans to list new Indian derivatives in June this year. It may be recollected that the NSE and other exchanges had decided to stop giving tick-by-tick live data to other global exchanges creating a problem for the SGX to trade in Nifty futures. While the new product will replace the SGX Nifty Futures currently trading, NSE is not sure how the compliance will work. SGX has also announced that the new products will enable the seamless transition of India risk exposures, although is not too sure how it will work!
For fiscal year 2018-19, Citi has pegged the earnings growth for Indian companies at 20% with some clear downside risks. This would be a welcome change after nearly 4 years of muted earnings growth. Citi expects the greenshoots of the last 2 quarters to now get consolidated. Citi expects the real earnings outperformance to come from sectors like energy, automobiles and metals. However, financials, pharmaceuticals and telecom companies are expected to lag. In case of financials, which has the largest exposure on the Nifty of nearly 36%, Citi expects the dual pressure of NPAs and bond price depreciation to take its toll on Indian banks. Citi is also wary of the impact of the overhang of the PNB and the ICICI Bank episodes. However, Citi has cautioned that this growth is on a weak base.
Thyssen Krupp expects a final decision on the Tata Steel joint venture by the end of June. The due diligence of the proposal is almost completed. While the deal was announced a couple of years ago, it was stuck for two principal reasons. There were questions over the pension burden at Tata’s Port Talbot steel plant in Wales and the special rights given to its Dutch plant. Tata Steel had invested heavily in European steel in 2007 at the peak of the steel cycle through the acquisition of Corus. However, the centre of gravity of steel has since shifted to Asia, which is where Tata Steel is now focusing.
