InvestorQ : How were the latest month core sector numbers, I understand there was a sharp bounce?
Neelam Naik made post

How were the latest month core sector numbers, I understand there was a sharp bounce?

Anu Biswas answered.
4 weeks ago

As is already well known, the core sector or the infrastructure sector is an amalgam of 8 major infrastructure sectors. It broadly comprises of coal, electricity, steel, cement fertilizers, oil extraction, oil refining and natural gas. It has a weightage of 40.27% in the IIP basket and is also a key lead indicator for the GDP growth trends in the market. The September 2022 core sector was announced on the last working day of October. For the month of September, the core sector growth came in at 7.9%, a sharp turnaround from the last few months, especially the 4.1% recorded in the previous month of August.

Let me now focus on how the 8 core infrastructure sectors in the basket performed in the month of September. Here is a gist.

· Out of the 8 core sectors, total of 6 sectors were in the positive in September 2022 on a yoy basis. The only 2 sectors to stay with negative output growth were crude oil extraction and natural gas.

· The government spending on fiscal outlays, with focus on capex is making an impact. In September 2022, cement sector led the way with 12.1% growth, followed by coal sector at 12%, fertilizers at 11.8% and electricity growing at 11%. Even steel grew 6.7%.

· Crude oil extraction continued to lag due to the problem of aging wells in India and that is a problem the government is also familiar with. At the same time, the natural gas saw lower output in September 2022 on account of pricing issues in gas.

· Certain items have an overt impact on the core sector due to their high weightage. For instance, the smart growth in September was driven by growth in high weightage sectors like refinery products with 28.04% weight, electricity with 19.85% weight, Steel with 17.92% weight and coal with 10.33% weight. That made the real difference.