After contracting for two straight months, industrial production recorded 2.6 percent growth in July. Venugopal Dhoot, CMD, Videocon, says the economy will once again see around 7-8 percent growth in IIP numbers.
On capital goods growth coming in at 15.6 percent y-o-y, he says, last year there was no growth. But now, people have started investing in all industries because investment in capital goods has become necessary for next year’s production etc.
Markets are expected to react positively to the IIP and CPI numbers because in the current market scenario, growth is primarily being driven by exports, says Deven Choksey of KR Choksey Shares. So in such a situation, manufacturing segment contributing higher to the growth would cheer the markets, he adds.
Below is the verbatim transcript of Venugopal Dhoot and Deven Choksey's interview on CNBC-TV18.
Q: We have got an industrial output number which is much better than what we have seen in many months. The last time I saw anything as positive was may be last October. What is your sense 2.6 percent growth are things changing for the better on the ground?
Dhoot: It appears that now everything is going positive for Indian economy. IIP you have seen 2.6 percent. We have been seeing negative growth and this negative growth has turned into positive is a good sign and Dr Rajan has taken very good steps. Rupee is under control and inflation also he feels will be in control. People are thinking that interest rates will fall, domestic production will be taking place and the IIP number will further get improved and we have seen a time when IIP numbers were around 7-8 percent. So, those times will come back and that is the futuristic view I am taking.
Q: Is anyone, whether your group or any other group you know investing at all because we have got a capital goods growth of 15.6 percent year-on-year as well month-on-month increase of over 20 percent. Is someone indulging in capex that has thrown up this good number?
Dhoot: Previous year there was no growth, so if you take the comparable numbers this year you will be feeling that there is a growth. This is because people have now started investing in all the industries because investment in capital goods has become necessary for next years production etc. So, even though base numbers were different you can get growth this year.
Q: Both the numbers we have got in the last 10 minutes have been fairly decent. Industrial growth 2.6 percent against expectations of 0.2 percent contraction and consumer price inflation marginally better 9.5 percent against expectations of 9.6 percent, how will markets react tomorrow?
Choksey: Market should be reacting positive as I see it in this kind of an environment because more importantly the export driven growth which is happening be it in the durable segment or be it in the industrial segments like petrochemical and refinery business where the export has been something and in this situation when we see the manufacturing segment contributing higher to the growth I would think that the market would react little bit positive to it.
Q: It is an overbought market, overbought in the sense, we saw five days of relentless rally and then this profit taking that came in today. So, in spite of these technical positions in the market you think this number can have a positive impact tomorrow? We could be in the green?
Choksey: We would not say that entire market would react positive. In some of the sectors you might probably see some amount of upside. Particularly if you look at automobile you might probably see the upside. You might probably also see upside in some of the petrochemicals business like Reliance kind of a company where it is suggesting that they would have higher amount of export and the benefit of depreciated rupee.
So, such kind of heavyweights within the respective space could react positive in the market. Overall market I do agree that technically it is in an overbought zone. Put Call ratio is also staying on the higher side. So, to an extent it could probably taper off the kind of rise that it may have in the market if it is opening up with a gap.