about 11 days ago
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The market might not care too much for the IIP data but the three recipients of the economics Nobel award are an acknowledgment of the importance of data.

David Card got one half of the Nobel prize for his empirical contribution to labour economics; and the balance 50% was awarded to Joshua Angrist and Guido Imbens for their methodological contribution to teasing out the cause and effect of natural experiments, or situations in the real world that resemble randomised experiments. And in this era of Big Data where data is the new gold, its significance hits home real hard.

Well, coming back to the macro data, retail inflation (CPI) for Sept eased to 4.35% v/s 5.3% (MoM). And IIP for August was at 11.9% v/s

A quick look at the inflation internals: (MoM)

  • Food inflation at 0.68% v/ 3.11%
  • Vegetables (-)22.47% v/s (-)11.68%
  • Fuel & light – 13.63% v/s 12.93%
  • Housing 3.58% v/s 3.90%
  • Clothing and footwear 7.16% v/s 6.84%
  • Pulses 8.7% v/s 8.8%

The puzzle here – we all are paying much more for the tomatoes and spinach that we buy, yet the macro data says that its in the negative! Surely something is amiss here. Maybe what we are paying for is the price of fuel – price of veggies might have gone down but that of transportation is what impacts us. And now we have to worry also about electricity costs rising, meaning the pressure on inflation will take center stage in Q3.

Till now, companies have not really been able to pass-on the rising inflation to the consumers as demand itself remains benign but once demand picks up full steam, companies too, to protect their margins are sure to hike rates. This in turn means that we need to wait and watch before we start to celebrate – let’s keep our eyes peeled for rising inflation.

IIP for August came in at 11.9% v/s 11.5% (MoM) and this was more or less in line with what most economists had penciled in.

The good news is that we are slowly but surely looking at growth perking up. Many companies have announced capex plans, IPO markets have never been so bullish, companies are also reporting a good jump in order book; so overall, things are indeed looking up but on the longer term, we need to look at the horizon ahead.

The market, as we said earlier, will pay no heed to this news. What will be most eagerly awaited would be the earnings of Infosys. The other earnings too, like that of Mindtree and Wipro will be watched – IT sector would pretty much be the highlight tomorrow.

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