After opening the day on a positive note, stock markets in India have continued their momentum. Sectoral indices are trading on a positive note with stocks in the metal sector and healthcare sector witnessing maximum buying interest.
The BSE Sensex is trading up 168 points (up 0.5%) and the NSE Nifty is trading up 45 points (up 0.4%). The BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 65.24 to the US$.
From the automobile space, Ashok Leyland share price is witnessing buying interest today as the company informed bourses that it has won an order for 10×10 vehicles to carry the smerch rockets from the Ministry of Defence.
In the news from macroeconomy space, India’s factory output remained strong in February. The index of industrial production rose 7.1% in February over the year, compared with a revised 7.4% growth in the previous month, according to data from the Ministry of Statistics and Programme Implementation.
The consumer durables and consumer non-durables segments recorded a growth of 7.9% and 7.4%, respectively. The pace of mining activity, however, declined 0.3%, which was seen on the back of a decline in coal production.
Note that the industrial production has been rebounding since October when it slowed to 1.8%, as can be seen from the chart below:
India’s Industrial Production is Improving
How does IIP data affect the stock market in India?
Low consumer spending means low demand. Producers react to low demand by reducing their production. Lower industrial production means lower sales and profits for corporates.
On the other hand, strong IIP growth means higher demand which leads to higher production. This will ultimately result in higher corporate sales and profits.
These numbers though look better due to the low base of last year. Last year’s production was disrupted due to the effects of demonetization.