The moderate growth in Monthly Index possibly have been helped by growth in IIP-Mining and Capital goods, with a lag.
In continuation to the launch of the SBI Composite Index on December 9, 2014, State Bank of India herewith releases yearly as well as monthly Composite Index value for the month of May 2015.
The yearly SBI Composite Index for May 2015 decelerated to 56.4 (High growth) from 58.2 (High growth) in April 2015, due to entrenched disinflationary impetus and weak demand. The Monthly Index however inched up from 46.8 (Low decline) in April 2015 to 53.8 (Moderate Growth) in May 2015. The moderate growth in Monthly Index possibly have been helped by growth in IIP-Mining and Capital goods, with a lag.
However, we believe that due to continued tepid credit growth and subdued commercial vehicle sales in recent period, a negative impact may precipitate in June/July 2015 IIP. This will subsequently reflect in our Composite Index values, going forward. We are overtly concerned regarding the weak demand conditions that is refusing to pick up. Inflation numbers will continue to surprise on the downside, with retail inflation likely to be at sub 4% within the next 2-3 months, and this will not be a result of only base effect, as widely believed. This is already undershooting RBI projections (5.8% by Mar’16) by 40-50 basis points as off now. Wholesale prices will remain in deep negative territory for most part of 2015, if not the entire duration.
Though some of the companies have been able to manage top line growth, deterioration in EBIDTAM reflect the kind of strain in the books of the companies. These companies may not be able to continue the same way for a longer period since as competition increase, addition of volume from other than core business may be at a cost and affect bottom line too.
The positive thing is that the Government is planning to come out with several project initiatives. We feel that the infra activities will start possibly from the second half of this year as the Government would be in a position to push the projects and schemes in the next six months. Rating upgrades are seen in Mid-sized companies (Operating Income between Rs 100 crore to Rs 500 crore) showing expectations of better result in 2015-16, that had seen the most stress.
With the Government doing its bit, it is imperative to improve sentiments further through another round of monetary easing. Interestingly, recently Spain, France and Italy growth accelerated on the back of strong household consumption (albeit boosted by energy consumption), defying the negative messages from the persistently weak manufacturing PMIs. Why can’t it also happen in India?
The Index captures two components of the manufacturing cycle namely month-on-month and year-on-year growth on a scale of 0 to 100. Index above 50 implies growth over previous respective period and less than 50 will suggest a contraction over respective period.
The yearly SBI Composite Index for May 2015 decelerated to 56.4 (High growth) from 58.2 (High growth) in April 2015, due to entrenched disinflationary impetus and weak demand. The Monthly Index however inched up from 46.8 (Low decline) in April 2015 to 53.8 (Moderate Growth) in May 2015. The moderate growth in Monthly Index possibly have been helped by growth in IIP-Mining and Capital goods, with a lag.
However, we believe that due to continued tepid credit growth and subdued commercial vehicle sales in recent period, a negative impact may precipitate in June/July 2015 IIP. This will subsequently reflect in our Composite Index values, going forward. We are overtly concerned regarding the weak demand conditions that is refusing to pick up. Inflation numbers will continue to surprise on the downside, with retail inflation likely to be at sub 4% within the next 2-3 months, and this will not be a result of only base effect, as widely believed. This is already undershooting RBI projections (5.8% by Mar’16) by 40-50 basis points as off now. Wholesale prices will remain in deep negative territory for most part of 2015, if not the entire duration.
Though some of the companies have been able to manage top line growth, deterioration in EBIDTAM reflect the kind of strain in the books of the companies. These companies may not be able to continue the same way for a longer period since as competition increase, addition of volume from other than core business may be at a cost and affect bottom line too.
The positive thing is that the Government is planning to come out with several project initiatives. We feel that the infra activities will start possibly from the second half of this year as the Government would be in a position to push the projects and schemes in the next six months. Rating upgrades are seen in Mid-sized companies (Operating Income between Rs 100 crore to Rs 500 crore) showing expectations of better result in 2015-16, that had seen the most stress.
With the Government doing its bit, it is imperative to improve sentiments further through another round of monetary easing. Interestingly, recently Spain, France and Italy growth accelerated on the back of strong household consumption (albeit boosted by energy consumption), defying the negative messages from the persistently weak manufacturing PMIs. Why can’t it also happen in India?
The Index captures two components of the manufacturing cycle namely month-on-month and year-on-year growth on a scale of 0 to 100. Index above 50 implies growth over previous respective period and less than 50 will suggest a contraction over respective period.
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