SBI Composite Index for September 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 September 2015.

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 Sep’15, from 53.1 (Moderate Growth) in Aug’15. The upturn has been majorly driven by manufacturing, while mining and electricity are still acting as a drag on economic activity. We expect, September IIP may be the highest since Nov’14, when it expanded at more than 5%.

The good thing is that we are now seeing credit growth in some industries like Drug & Pharmaceuticals, ‘Petro Chemicals, Basic Metals, Iron and Steel and Power sector.

We are also positive on the Road sector that is employment intensive. Going forward, 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 have been 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.

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.