Crude oil production contracted 2.4 per cent in January, the pace which is the highest in six months

Investments in the Indian capital market through Participatory notes (P-notes) dropped to Rs 87,989 crore at the end of January

Power consumption in February 2021 was 103.25 BU, a tad lower than 103.81 BU in the same month of 2020, as per the power ministry data.

New Delhi, NFAPost: Growth in eight-industry, core sector output dipped to 3.7% in January against 4.1% in the previous month, showing a mild effect of Omicron-induced region-specific lockdowns.

Even then, expansion in the index of industrial production (IIP) may rise in January against 0.4% growth in December due to the favourable base effect of the previous year. The core sector has a bit over 40% weighting in the IIP. This means the industrial sector may have escaped any major impact of the third Covid wave, which was milder than the previous two.

“The industrial sector appears to have escaped relatively unscathed from the third wave, with a muted dip in the y-o-y growth of the core sector as well as the mild sequential decline in the daily average generation of GST e-way bills,” ICRA Chief Economist Aditi Nayar said.

As many as 68.8 million e-way bills were generated in January against 71.6 million in the previous month. The core sector grew 11.6% in the first 10 months of the current fiscal year against a very low base of an 8.6% contraction in the corresponding period of the previous year.
Only two of the eight industries — coal and steel — saw growth picking up in January against that in the previous month. While coal output grew by 8.2% against 5.2%, steel production rose 2.8% against a contraction of 0.7% over this period.

These two industries have around a 28% weighting in the core sector or a bit over 11% in the IIP.

Also, even as cement production grew at a lower pace of 13.6% in January against 13.9% in December, the numbers showed the construction sector was in full swing, particularly in infrastructure.

All the other five segments — crude oil, natural gas, refinery products, fertilisers, and electricity — recorded poor performance in January against that in December. Of these, fertiliser production contracted by 2% in January against a growth rate of 3.5% in the previous month.

“Fertiliser production is down, which can be attributed to the end of the season phenomenon,” Bank of Baroda Chief Economist Madan Sabnavis said.

The sowing season in rabi ended in January.

Crude oil production contracted 2.4% in January, the pace which is the highest in six months. Production has been declining each month for at least a year now. Sabnavis attributed this to low investment by oil-generating companies, particularly ONGC.

Even then, why do economists think the IIP would perform better in January than in December, the month when its growth fell to a 10-month low of 0.4%. This is because in January and February last year, the IIP had contracted.

“With an easing of the unfavourable base effect, we expect IIP growth to rise to 1% in January 2022 from the initial estimate of 0.4% for December 2021,” Nayar said.

It should be noted there is no one-to-one relation between core sector production and the IIP. For instance, core sector output growth rose to 4.1% in December from 3.4% in November, but IIP growth declined to 0.4 per cent from 1.34% over this period. This is because the other 60% of the IIP and the base effect also play an important part.

Perhaps because of this Sabnavis was more optimistic as he said: “IIP growth can be expected to be around 3%, based on an uptick in consumer goods to an extent, along with the base effect.”

Investments through P-notes decline to Rs 87,989 cr in Jan

Investments in the Indian capital market through Participatory notes (P-notes) dropped to Rs 87,989 crore at the end of January and experts believe that foreign investors will continue with their negative stance amid the Ukraine crisis.

P-notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.

According to Securities and Exchange Board of India (Sebi) data, the value of P-note investments in Indian markets — equity, debt and hybrid securities — was at Rs 87,989 crore by the end of January compared to Rs 95,501 crore at December-end.

At the end of November, the investment level was at Rs 94,826 crore.

Of the total Rs 87,989 crore invested through the route till January 2022, Rs 78,271 crore was invested in equities, Rs 9,485 crore in debt and Rs 232 crore in hybrid securities.

Abhay Agarwal, Founder and Fund Manager at Piper Serica, a Sebi-registered PMS, said there was a 7.8 per cent fall in value of equity P-notes in January against an almost flat return by Nifty. This is in line with expectations as foreign investors were aggressive sellers throughout January continuing the trend seen since October 2021.

After a net reduction of Rs 6,677 crore, the value of equity P-notes has fallen to Rs 78,271 crore, the level last seen in January 2021. In debt segment also, there was an almost 9% reduction in the value of P-notes.

“We expect the value of P-notes to register another negative number for the month of February as FPIs continued to be aggressive sellers and the Nifty registered a 3% fall for the month,” he said.

With Omicron fears largely behind, investors were hopeful of a rapid recovery in the global economy. However, with the US Federal Reserve taking a ‘faster and sooner’ stance on rate hikes investors have been cutting their holdings in risk assets across the board, Agarwal said.

“We have seen cash holdings of global funds increase to 5.3% from 5% a month ago. The Ukraine geopolitical situation has put further pressure on already skittish global investors. We expect that FPIs will continue their net negative stance till clarity emerges on an end to the Ukraine situation. The only silver lining is the LIC IPO,” he noted.

The assets under the custody of FPIs declined to Rs 52.12 lakh crore in January-end from Rs 52.72 lakh crore in December-end.

Piper Serica’s Agarwal said Indian economy continues to open up rapidly.

“Quarterly earnings numbers have been broadly in line and overall market valuation has tapered down to the historical range. Our expectation is that we will see significant FPI inflows during the current calendar year, but it is difficult to forecast the timing of the same,” he added.

Power consumption grows 2.2% to 105.54 billion units in Feb
Meanwhile, India’s power consumption growth remained subdued at 2.2% year-on-year in February to 105.54 billion units (BU), showing the impact of local restrictions imposed by the states due to the third wave of COVID-19.

Power consumption in February 2021 was 103.25 BU, a tad lower than 103.81 BU in the same month of 2020, as per the power ministry data.

According to the data, peak power demand met or highest supply in a day rose to 193.64 GW in the month under review compared to 187.97 GW in February 2021 and 176.38 GW in February 2020.

Experts are of the view that the power consumption growth remained subdued in February due to the impact of local restrictions imposed by states to curb the spread of the deadly coronavirus.

The local restriction had affected industrial and commercial demand, the experts said.

The third wave of the pandemic hit the country in January 2022, which forced many states to impose local restrictions like night and weekend curfews. They have also taken measures like banning dining in bars and restaurants. These restrictions were eased gradually by the states in February.

The experts opined that the power demand and consumption would improve in the coming months as the states are now lifting local restrictions after a decline in the positivity rate.

Power consumption would surge with increased industrial and commercial activities after the easing of lockdown restrictions and due to the onset of summers in the coming months, according to the experts.

Power consumption grew 1.8% in January 2022 to 111.80 BU from 109.76 BU in the year-ago period.

It had grown by 3.3% in December 2021 to 109.17 BU from 105.62 BU a year ago.

In November 2021, power consumption increased 2.5% to 99.32 BU from 96.88 BU in the year-ago month.

Various states had imposed lockdown restrictions after the second wave of the pandemic in April 2021, which affected the recovery in commercial and industrial power demand. Curbs were gradually lifted as the number of COVID cases fell.

Power consumption witnessed a 6.6% year-on-year growth in May 2021 at 108.80 BU, from 102.08 BU in the same month of 2020.

In June 2021, it grew nearly 9% to 114.48 BU compared to 105.08 BU in the same month of 2020.

In July 2021, it rose to 123.72 BU from 112.14 BU in the year-ago period, while in August, power consumption surged by over 17% to 127.88 BU against 109.21 BU in the same month a year back.

Power consumption in September 2021 remained flat at 112.43 BU, mainly due to the delayed monsoon.

In October 2021, power consumption grew at 3.3% to 112.79 BU from 109.17 BU in the same month of 2020.

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