Will FY13 GDP data manage to give new direction to market?
Amid consolidation in the local markets will Q4 and FY13 GDP numbers be able to provide any new direction to market or will it be another non-event for Indian indices? Find out here.
On the day of expiry, Indian indices traded in a narrow range and inched up slightly higher. Throughout the week market has been in consolidation mode with trade being more stock-specific, however Friday may manage to give a new direction to the trade based on January-March gross domestic product numbers, experts said.
One thing is for sure 2012-13 will go down as the year the country clocked its slowest growth in a decade. The markets are bracing for Friday, when not only fourth quarter but also FY13 GDP numbers are to be announced.
Market seems to have already factored in sub-five percent growth for the fourth quarter. Dipan Mehta, Member of BSE/NSE said that GDP numbers will not be market moving. According to him the biggest event to look forward to would be Reserve Bank of India (RBI) policy in June.
“The GDP numbers by and large are historical in nature. If they are negative there will be calls for interest rate cuts and if it is positive then also it doesn’t mean very much because the actual improvement would not be quite material,” Mehta added.
Better than expected IIP number in March and decline in WPI (wholesale price index) as well as CPI (consumer price index) inflation in April, had given hopes to investors that economy is probably bottoming out.
The government has predicted the economy to grow at around 5.2 percent in FY13. Till the third quarter, the economy grew 5.1 percent, with the Q1 being the highest at 5.5 percent and Q3 being the lowest at 4.5 percent.
Most economists are predicting that the economy to growth at sub 5 percent in fourth quarter. For the full year economist are pegging a GDP growth of 5.2-5.8 percent.
Pratip Chaudhuri, Chairman the largest public sector bank State Bank of India ( SBI ) expects FY13 GDP growth to come at above 5 percent.
Nomura believes fourth quarter GDP growth will remain subdued at 4.5 percent due to the pullback in government spending, weaker consumer demand and subdued investment.
JP Morgan has pegged fourth quarter growth at 4.9 percent on the back of a recovery in services. It says this will bring growth for the full fiscal year to 5 percent, down from 6.2 percent in FY12. StanChart expects fourth-quarter GDP growth at 5 percent, primarily because of a lower base a year ago. It also expects some upward revision in recent quarterly GDP releases, pushing the full-year GDP for FY13 to 5.2 percent.
Most analyst agreed that economic growth is bottoming out but are cautious that the pick-up will be gradual and uneven.
"Our expectation for FY14 growth is about 5.6 percent, its much better than FY13, its not as optimistic as some consensus expectation is about 6 percent so we are not expecting a gung ho recovery, delta going forward should be positive," Sonal Varma from Nomura India said.
Fourth quarter earnings of corporate have also not show any significant signs of revival. “It is going to be a slow (earnings) recovery process. Even the markets will move in line with that because today the markets are trading at fair valuations and so we cannot expect markets to rerate based on these earning numbers," Harsha Upadhyaya of Kotak Mutual Fund said today.
CLSA India believes that any meaningful recovery will be possible only after the general elections in 2014. Agreeing to this view Dipan Mehta said, “The real growth in GDP would come perhaps only when interest rates are cut by another 50-100 basis points or we have an improvement in the overall business confidence post the Lok Sabha elections.”