Date: 05-02-2019
Impact: Positive (Real Estate, Steel, Cement); Negative (Crude,
Petroleum Refinery)
Brief:
IIP index for core category has expanded by 2.6% in December, 2018 as against
3.8%, a year earlier. However, in YTD term, the sectors are collectively
expanding at a healthy rate of 4.8% in FY19 as against 3.9%, the previous year.
It is however noted that the December number is lowest in the past one and half
years. Segregation reveals that Non-energy sectors such as steel and cement
have witnessed strong growth during the reference period. A rebounding of sorts
for the real estate sector has been creating strong demand for steel and cement
industries.
IIP index for core category has
expanded by 2.6% in December, 2018 as against 3.8%, a year earlier. However, in
YTD term, the sectors are collectively expanding at a healthy rate of 4.8% in
FY19 as against 3.9%, the previous year. It is however noted that the December
number is lowest in the past one and half years. The below average performance in December is primarily attributed
to de-growth in major energy sectors such as those associated with crude
(-4.3%) and petroleum refinery (-4.8%).
Non-energy sector such as steel and
cement, on the other hand, have witnessed strong growth during the reference
period. With a 13.2% growth, steel industry remains the best performing industry
among the core category. Another industry that catches our interest is cement
industry, which has posted 11.6% growth in December, 2018 despite a hostile
base (17.7%, the previous year). In YTD term, the industry has been growing by
nearly 14% and continues to lead the performance of the core category. The
consistent performance of steel and cement industries is associated with the
real estate sector. According to Knight Frank data, 76% growth has been
recorded in ‘new residential projects’, with units being pegged at 1.82 lakh as
of calendar year, 2018. Similarly, sales of residential properties have
increased by 6%, reaching 2.42 units. We believe that a rebounding of sorts for
the real estate sector has been creating strong demand for other associated
industries as well. Given the performance, we continue to peg the collective
core sector growth at 4.6% in the current financial.
|
Core
|
Coal
|
Crude
|
Natural Gas
|
Petro Refinery
|
Fertilizer
|
Steel
|
Cement
|
Electricity
|
Dec-17
|
3.8
|
0.4
|
-2.1
|
1.1
|
6.6
|
3.0
|
0.4
|
17.7
|
4.4
|
Oct-18
|
4.8
|
10.6
|
-5.0
|
-0.9
|
1.3
|
-11.5
|
2.2
|
18.4
|
11.4
|
Nov-18
|
3.5
|
3.7
|
-3.5
|
0.5
|
2.3
|
-8.1
|
6.0
|
8.8
|
5.4
|
Dec-18
|
2.6
|
0.9
|
-4.3
|
4.2
|
-4.8
|
-2.4
|
13.2
|
11.6
|
4.0
|
FY18YTD
|
3.9
|
1.5
|
-0.4
|
4.0
|
3.9
|
-0.6
|
6.2
|
2.4
|
5.1
|
FY19YTD
|
4.8
|
7.8
|
-3.7
|
-0.1
|
4.1
|
-1.4
|
4.7
|
13.9
|
6.3
|