IIP playing second fiddle

Stock market rallyed 475 points on tuesday despite IIP (Index of industrial planning) figures showed that it had actually dipped by 2.3%. Does this reflect too much of a optimism of what is lying ahead or it is that IIP figure isn't weilding that much power as it used to do. Lets analyse it but with an introduction of IIP construction.

IIP is a monthly index which was constructed with the main aim of providing us a picture of industrial production going in our nation and the responsibility of its compilation was assigned to the Central Statistical Organisation (CSO). For comparision purpose, base year for IIP is taken as 1993-94 where IIP is considered equivalent to 100 points. IIP is constitutes 538 individual items which are combined into 283 groups of items.

The all thoses items which makes up IIP figure with their respective weights (100) are divided into the three sectors shown as under:

Mining 64(1) 10.47
Manufacturing 473 ( 281 ) 79.36
Electricity 1 (1) 10.17
TOTAL 538 (283) 100.00

so how is IIP calculated
IIP is a simple weighted arithmetic mean of relative production calculated by using Laspeyre’s formula
I=Σ(Wi*Ri)/ΣWi,
Where I denotes Index,
Ri is the production relative of the i-th item for the
and Wi is the weight allotted to it based on Gross Output.

Now back to our real objective of finding why IIP's march 2009 figure had no effect on stock exchange on tuesday. Few of the answer could be as-
1. Base effect - ie IIP figure is depicting a very low figure which means even a slightest change in it leads to a very high percentage change.
2. ... or it could be that data reflected by March IIP number was already factored into the market . IIP is a composition of 17 sectors and each sector is given a dicerning look by equity investors.The moment there is some deviations in their performance their results are taken into account. And by giving factoring IIP into market would be like adding salt to your dish second time when in fact somebody has already added salt for its taste.
3. ... or it could be that election results are round the corner and whole country speculating optimistically especially for the corporate world, and probably that is the reason why IIP figures were overshadowed by election speculation euphory.

Of all the probable reasons 1st and 2nd reason seems to be more plausible ones since IIP figures in the past have mattered more when there was huge deviation in percentage terms with moderate base figure. Second is equlay good because IIP causes effect when it puts up a sudden surprise which indivual sector analysis was not explored.