SBI Composite Index for August 2015

In continuation of the launch of the SBI Composite Index on December 9, 2014, State Bank of India herewith releases yearly as well as monthly Composite Index value for the month of August 2015.

The yearly SBI Composite Index for August 2015 is showing traction with the index increasing to 53.1 (Moderate Growth) from 49.7 (Low Decline) in the previous month. The Monthly Index also improved, albeit with less magnitude to 52.2 (Moderate Growth) from 46.7 (Low Decline) in July 2015. The upturn has been majorly driven by manufacturing, while mining and electricity are still acting as a drag on economic activity. We expect, August IIP may be the highest since Feb’15.

The positive trends in capital goods sector supports pick-up in economic momentum. One of the positive development is the order inflow of four major companies-BHEL, L&T, ABB Ltd and Thermax Ltd which grew by 5.5% (y-o-y) in the Jun’15 quarter. Furthermore, the Medium & Small companies in Capital Goods (Electrical & Non-Electrical Equipment) are making some in-roads in topline growth. Also, the recent quarter results (Q1FY16) reveal that the capital goods (electrical equipment) reported profit. Looking ahead, it is expected that growth in order inflow in FY16 would be in the range of 15%-17% largely driven by state utilities. However, pricing pressure still persists in the system due to excess manufacturing capacity and lower opportunities. As the Government is taking steps in the right direction in terms of policy action, we believe that execution will pick up from H2 FY16.

The Index captures two components of the manufacturing cycle namely month-on-month and year-on-year growth on a scale of 0 to 100. Index above 50 implies growth over previous respective period and less than 50 will suggest a contraction over respective period.