Markets buoyant, IIP numbers positive

Fri, 10 Dec 01:30 pm

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Indian indices have retained most of their gains on the back of robust IIP numbers for the month of October. Stocks from the consumer durables, healthcare and banking space are leading the gains while stocks from the technology and auto space are trading in the red.

The BSE-Sensex is up by 195 points while NSE-Nifty is trading 73 points above the dotted line. BSE-Midcap is trading up by 1.5% while BSE-Smallcap index is trading 1.7% above yesterday's closing. The rupee is trading at 45.05 to the US dollar.

The industrial output in October rose by 10.8% YoY. The IIP data reveals that manufacturing sector during October grew by 11.3% YoY and electricity generation by 8.8% YoY. The capital goods industry, according to data, recorded a growth of 22% YoY in October. The growth rate of the mining sector, however, decelerated to 6.5% YoY during the month. During April-October, the industrial output showed an increase of 10.3%, up from 6.9% during the corresponding period last year. The government attributed the rise in IIP to improved performance of the sectors such as ship building, power equipment and generators.

Stocks of tyre manufacturers are currently trading firm led by Apollo Tyres, J K Tyre and Industries, CEAT and MRF. Over the past few weeks, stocks of tyre manufacturers have been under pressure on the back of many factors varying from higher input costs, to competition from imports, amongst others impacting the companies. Primary reason is that of rubber prices doubling to Rs 200 a kg over the past year. While the tyre manufacturers have benefitted from the supply demand mismatch over the last year, the same in not the case in the recent past. High rubber prices as well as tyre shortage have led OEMs to resort to cheaper imports. As such, the Indian tyre manufacturers are feeling pressure due to the same and have been finding it difficult to pass on costs to their customers with ease. While the tyre manufacturers are able to pass on costs to the final users (in the form of replacement demand), the same is not the case with OEMs. And since the OEMs, manufacturing both commercial as well as passenger cars, have been clocking their best ever volumes over the past year, tyre manufacturers had to shift their focus towards them. And on the back of the higher than expected increase in input costs, coupled with the inability to pass on costs to the OEMS, their margins have come under pressure in recent times and particularly in the latest quarter.