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Q1FY22 GDP prints to come in healthy owing to low base. Can it lift the market sentiment?

The recent trends show that the economic recovery is picking pace and the trajectory of growth is likely to sustain in the current quarter also.

August 31, 2021 / 01:58 PM IST

India's April-June quarter (Q1) gross domestic product (GDP) numbers are expected to show a strong jump owing to the lower base of the last year's first quarter and a rebound in consumer spending post the second wave of COVID-19.

The Q1FY22 GDP prints are likely to be released on August 31.

As per a Reuters poll, the country's GDP growth might have touched a record in Q1FY22.

According to SBI research report Ecowrap, the country's Q1FY22 GDP is expected to grow at around 18.5 percent.

However, it is lower than the Reserve Bank of India's GDP growth projection of 21.4 percent for the June quarter.


Also Read | What to look for in the Q1 GDP numbers

Low base to boost numbers

Most analysts believe the impact of the second wave was not as grave as it was anticipated earlier. A sharp recovery was seen in June when the number of new Covid cases fell.

"The Q1 GDP is expected to show a sharp growth owing to a low base and recovery in economic activities towards the end of the quarter," said Vinod Nair, Head of Research at Geojit Financial Services.

Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities, expects Q1FY22 real GDP growth at 21.7 percent on the back of a low base.

"Even though May had seen a slowdown due to the lockdowns, there was a sharp recovery in June. The economic impact of the second wave has been much more muted than the first wave," said Rakshit.

Anagha Deodhar, Chief Economist at ICICI Securities expects Q1FY22 GDP growth to come in at nearly 22 percent year-on-year (YoY), which is slightly higher than the consensus estimate.

"The main reason for this exceptionally strong growth in Q1FY22 is the low base effect," said Deodhar.

She expects industry (specifically, manufacturing and construction sectors) to perform well in Q1FY22, as shown by strong corporate performance results.

However, services, due to their contact-intensive nature, are likely to have suffered more during the second wave of COVID and are likely to record relatively lower growth compared to the industry, said Deodhar.

The recent trends show that the economy is picking pace and the trajectory of growth is likely to sustain in the current quarter also.

Corporate results of Q1 also reflected healthy recovery while aggregate economic activities surpassed pre-second wave levels (Mar-21) in the first week of August, experts pointed out.

Deepak Jasani, Head of Retail Research, HDFC Securities expects the economic activity index to remain on an upward trajectory supported by the onset of the festive season and a pickup in the inoculation drive.

"Although investment demand is still anaemic, improving capacity utilisation and accommodative monetary and financial conditions continue to lend support for a long-awaited revival," Jasani said.

However, Jasani pointed out the sharp increase in commodity prices and resultant inflationary risks, rise in COVID cases in major trading partners and a possibility of a third wave of COVID-19 in India, pose a risk to growth.

Moreover, slow monsoon progress could also weigh on the rural economy that has already been hit by the second wave.

The likely impact on the market

The GDP number is an important factor for the market as a healthy number will underpin the bullish sentiment of the market.

The market seems to have factored in a healthy GDP number, experts said. However, a below-expected number can slightly disappoint the market. Even in that case, a knee-jerk reaction is unexpected.

"Corporate earnings growth has been strong and high frequency indicators point to high growth in Q1FY22. Construction and manufacturing would have fared relatively well even as services continued to remain weak. Given the macro conditions, the range for growth estimates would be quite large but markets could be disappointed if the growth prints below 18-19 percent," said Rakshit.

Brokerage firm Samco Research underscored that the market could be impacted by an eventful economic calendar that begins with quarterly GDP growth rate numbers, followed by auto sales numbers and manufacturing PMI data.

"Profit-booking may occur in certain overpriced stocks, however, investing in high-quality companies in stages would be a smart strategy," said Samco Research.

Global cues, rich valuations and tapering talks are some of the key factors that will have a strong influence on the mood of the market.

"The sharp outperformance in the past 18 months has led to concerns on valuations. The likely impact on liquidity due to changes in global monetary policy has concerned investors over the last few days," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Aug 30, 2021 01:41 pm
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