Thursday, March 12, 2009

Markets overlook lower IIP

Markets overlook lower IIP

The Indian markets continued with their northward journey on account of sustained buying activity.

The IIP (Index of Industrial Production) numbers are announced today. Industrial production declined by 0.5% YoY in January 2009 as against a 6.2% growth in the corresponding period previous year. This was mainly on account of decline in the manufacturing and mining output by 0.8% and 0.4% respectively on a YoY basis during the period. However, capital goods, consumer durables and consumer goods output grew by 15.4%, 2.5% and 1.1% respectively on a YoY basis during the same period. It may be noted that the growth in IIP is projected to be around 4.8% in FY09, while the IIP for the first 10 months of FY09 grew by just 3% YoY. Inspite of the stimulus packages announced by the government recently, the industrial production declined for the second month in a row.

Polls to affect companies’ forex losses
As per a leading business daily, the Institute of Chartered Accountants of India last week postponed the decision to relax the accounting standard 11 (AS-11) provision on mark-to-market (MTM) losses on foreign exchange fluctuations. Apparently, the decision was made on the grounds that it should not do anything that will be seen as benefitting a section of the society or the industry, in view of the upcoming national elections. It may be noted that around 150 Indian companies, who had raised overseas debt when the Indian rupee was relatively stronger, will have to book MTM losses with the currency touching 51 against the US dollar. In fact, several companies have instead chosen to deduct the loss from the cost of fixed assets as per the Schedule VI of the Companies Act.


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