Data heavy week

Critical data points tell a compelling story of Indian economy

The week just gone by had some interest data points which gave a clear pointer towards the week and month ahead. Data has been broadly mixed. On the trade front the data has disappointed with some redeeming features. While IIP growth has shot up, the inflation too has gone up. And corporate results have had some major disappointments in the early days.

Trade data riddle…

For the 10th month in succession, the exports of Indian economy recorded a downtick. On a y-o-y basis, exports were down by 25% and we may end the year with total exports of around $270 billion only. Imports too were down by 25%, but the trade deficit threatens to assume alarming proportions at 50% of exports for the full year. The only redeeming feature was that gold imports were down by $2 billion which helped the trade deficit to show a $2 billion fall. To sum it up, the trade data has once again raised the urgency of the need to focus on exports.

Inflation and growth data…

This month we saw the RBI’s warning of the base effect on inflation play out. CPI inflation was up from 3.78% to 4.4%, an uptick of almost 60 basis points. Even WPI inflation was up from -4.94% to -4.40%. This is broadly a good sign as the looming threat of deflation does not look so threatening now. The month of September saw the base effect waning and that led to the inflation going up. The government has already projected the inflation to go up closer to 5.5% by next year and that target looks achievable. Hence it should not impact the RBI’s rate trajectory too much. The IIP for the month was up by 200 basis points to 6.4% and that is the best part of the story. A higher growth rate means that GDP target looks more achievable and money supply can be better absorbed without stoking inflation.

Early corporate results…

Early corporate results have been a mixed bag. Hindustan Lever showed flat revenue growth and a fall in profits. That is not a great statement on rural demand. HUL could not get the benefit of lower input costs as these benefits had to be passed on to the end consumer.

Technology was the other big question mark last week. Firstly, we had HCL Tech issuing a profit and revenue warning on cross currency impact. Then the Infy results were good in context but guidance was lowered. The trend was repeated in case of TCS, who also referred to pressure on growth in constant currency terms. In a nutshell the data for the week has been mixed and the signals are not too clear. The quarterly results have disappointed. One hopes that this trend is reversed! ©

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