SBI composite index rises to four months high in September 2015

Upturn driven by manufacturing, while mining and electricity still drag on economic activity

The yearly SBI Composite Index for September 2015 is at a four month high at 53.9 (Moderate Growth), compared to last month index of 53.4 (Moderate Growth). However, the Monthly Index declined to 48.4 (Low Decline) in September 2015, from 53.1 (Moderate Growth) in August 2015. The index growth is expected to be 7.8% YoY and -3.2% mom.

The upturn has been majorly driven by manufacturing, while mining and electricity are still acting as a drag on economic activity. Besides, the positive trends in capital goods sector suggest the possible pick-up in economic momentum. IIP is also driven majorly by manufacturing (particularly capital goods) as revealed by higher ex-mining and ex-electricity growth.

The good credit growth is observed in some industries like Drug & Pharmaceuticals, 'Petro Chemicals, Basic Metals, Iron and Steel and Power sector.

The SBI research report expressed upbeat outlook for the Road sector that is employment intensive. Government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE), and has set an objective of building 30 km of road a day from 2016. These changes are positive but one can expect impetus in the road sector to come in next 18 months or so.

Comfort of lenders prioritized in framing changes to the agreement. Some of the key measures include back loading premium payments (from 4th year), deemed termination of projects, allowing greater equity contribution from NHAI (twice the cap), stringent penalties on non-compliance of maintenance contracts and collection of real-time traffic data.

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