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Feb industrial output seen up 16% YoY; RATE HIKE LIKELY

From : Prasanna Manvi at 10:51 AM - Apr 01, 2010 (23 months ago)

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IIP NUMBER WILL BE RELEASED TODAY @ 12.00 NOON, EXPECT VOLATILITY, TRADE CAREFULLY WITH STOP LOSS.
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India's industrial output and exports maintained their strong growth pace in February, official figures indicated on Wednesday, boosting expectations the Reserve Bank of India (RBI) will further tighten its policy in April.

Earlier this month the RBI surprised markets by raising key lending and borrowing rates by 25 basis points each, citing intensifying inflationary pressures.

"Industrial output is likely to have grown by about 16% in February, which would be slightly lower than January," Industry Secretary RP Singh told reporters.

Markets largely shrugged off the data, which reinforced expectations of at least another 25 basis point increase in key rates in April. The latest Reuters poll shows analysts expect rates to go up by another 100 basis points between now and end-December.

"The February number is much better than I expected, especially given that February core sector data was much lower than January," said Atsi Sheth, Chief Economist at Macro-Sutra, adding that her expectation was for about 11% growth.

The less widely watched consumer price index rose 14.86% in February from a year earlier, data showed, lower than January's annual rise of 16.22%, and reflecting moderating food prices.

But with headline inflation close to the 10% mark, expectations of a further tightening remain.

India's exports in February grew 34.8% year-on-year to USD 16.09 billion after an annual 11.5% rise in January, Trade Minister Anand Sharma said on Wednesday. He predicted they would grow 15-20% in the fiscal year that starts April 1.

"Maybe the external environment is getting better," said Sonal Varma, an economist at Nomura Securities. "Today's numbers are just another set in a long line of data pointing to domestic economic recovery."

EXPORT RECOVERY

The strong growth trend in exports is reflected in the narrowing of the trade deficit to USD 30.73 billion in the December quarter as against USD 31.90 billion in the July-September quarter.

However, Wednesday's data also showed India's current account deficit widened to USD 12.03 billion in the December quarter as against USD 11.67 billion a year earlier, due to sluggish remittances and services exports.

Foreign direct investments into India in February grew by about 15% year-on-year to USD 1.72 billion, the government said on Wednesday.

The flow of foreign funds will boost the rupee, a Reuters poll showed on Tuesday.

The Indian economy is expected to grow at 7.2% in the financial year 2009-10 and the government aims to cut its fiscal deficit to 5.5% of gross domestic product (GDP) by 2010-11.

Earlier this week, the government decided to borrow about USD 64 billion in the first half of fiscal 2010-11 out of a target of about USD 101 billion for the entire fiscal year.

Source: Money Control

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yeat interest is likely to hike.

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ALERT ALERT ALERT ALERT ALERT ALERT ALERT ALERT

********** WATCH OUT IIP NUMBER IN NEXT 30 MINUTES **********

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