3Q GDP growth and the industrial production print were much weaker than expected, pulling the index down. The SENSEX fell 1.7% mom, the rupee depreciated 1% mom, while the 1-year OIS swap rate fell 35 bp on average in February, compared to January, before rising towards the end of the month.
The biggest negative surprise came from the 3Q GDP growth data of 5.3% yoy (consensus 6.1%), especially the 2.2% yoy agricultural contraction. Although we expect agricultural growth to be 2.6% yoy in FY09, lower than the 4.9% yoy in FY08, the 3Q agricultural data exaggerates the extent of slowdown.
WPI inflation fell rapidly to 3% yoy on February 21, from 5.1% a month earlier. Fuel price inflation fell 4% yoy, sharper than the 0.8% yoy fall a month back.