Sonal Varma of Nomura Financial Advisory and Securities feels the momentum in the industrial sector seems to be stabilising and if it continues, the segment may show a significant pick up in the December quarter. According to her, the growth cycle itself seems to be stabilising and that is a positive sign.
Besides, Varma feels that if the current trend in industrial production for FY13 continues, there is no reason to be pessimistic and expects 5.5 percent GDP growth for the current fiscal year.
Gaurav Kapur of Royal Bank of Scotland is also of the view that the nascent signs of improvement are now visible in the purchasing managers index (PMI) numbers of December. "A pick up may still take time but clearly things are not getting any worse. Hence, the IIP data or whatever information you can gather from this one number or even the series in the last couple of months, points to the fact that we have hit a bottom. Things have turned around," he explained.
Must read: IIP contracts by 0.1% in Nov, may prompt RBI to cut rates
Here is the edited transcript of the interview on CNBC-TV18.
Q: Any first thoughts?
Varma: Given that there was a loss in working days, minus 0.1 percent on a seasonally adjusted basis, there is a very strong momentum.
Q: What would the overall outlook be? Does your second half outlook improve?
Varma: If October and November itself has been around 4 percent odd, it looks like in terms of the momentum at least the industrial sector which is actually what primarily drives business cycles, seems to be stabilising and if this momentum continues in December then there will be some pick up in the industrial segment in the December quarter.
I guess the overall picture that is coming up suggests that the investment side is still weak. It seems largely that the consumer durable side has surprised positively. It could be because around Diwali there has been an increase in production as production was cut quite substantially. We need to see how sustainable this is because looking at the commercial vehicle numbers, we do not get any sense of comfort that indicates that the cycle is turning around so soon. Yes, it is clearly stabilizing and that itself is positive right now. We are stabilizing overall on the growth cycle right now.
Q: Wanted to concentrate on the consumer durables point or consumer goods in general because in the previous month it was 13.2 percent but, this time it has come in at around 1 percent growth. In the previous month when we were looking at it in terms of September and October data, consumer goods actually came out as a saw point in that amount of data. Do you think the trajectory of consumer goods is now more positive vis-à-vis the decline that we had seen and besides what we saw in the Diwali months?
Varma: Looking at the year over year numbers, it is very difficult to paint any picture. Even for the consumer durables side, a positive reading in our view is actually a good number. As for the other segments, a positive reading means that underlying there has been a pickup in momentum. If you look at three month moving average so as to smoothen out the volatility, it would suggest that consumer durables is also probably seeing some uptick.
But, we are starting from very low levels and the best way to describe it would be that the economy is clearly bottoming out with initial signs of pickup. That is where we are right now overall on the cycle.
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