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Q2 GDP numbers surprise positively, likely to give impetus to market

The Indian economy, which witnessed a contraction of 23.9 percent in the June quarter, shrank 7.5 in the September quarter, according to official data released by the National Statistical Office on November 27.

November 27, 2020 / 08:31 PM IST

India's July-September quarter GDP prints came out better-than-expected, reaffirming that the signs of improvement in the economy were real.

The Indian economy, which witnessed a contraction of 23.9 percent in the June quarter, shrank 7.5 in the September quarter, according to official data released by the National Statistical Office on November 27.

The agriculture sector, which stood out in the first quarter, recorded a growth of 3.4 percent like in the previous quarter while the manufacturing sector, which contracted 39.3 percent in the last quarter, rebounded with a 0.6 percent growth.

Read more: India Q2 GDP: Are signs of revival real and what do latest numbers mean for FY21?

A poll conducted by CNBC-TV18 had estimated that the economy contracted by 8.9 percent in the July-September quarter of the current financial year. In the July-September quarter of FY20, India's GDP had grown by 4.4 percent.


Let's take a look at what top analysts have to say about the GDP prints and its impact on the market:

B Gopkumar, MD & CEO, Axis Securities

India’s July-September GDP confirms the faster normalisation of the activities in Q2, with a stronger than expected pickup.

September GDP print beats the market expectation with recovery in manufacturing that drives improvement in Q2, with a decent improvement seen in services.

The growth outlook has improved with the Q2 GDP print. Now the market will look for the sustainability of the demand, especially after the festive season, and will watch out for the direction of high-frequency indicators.

Binod Modi, Head- Strategy at Reliance Securities

Better-than-expected GDP print is mainly supported by a strong rebound in manufacturing. While Q2FY21 GDP print marks a sharp sequential rebound, the market will be focusing more on the prospects of recovery in H2FY21.

Given a 2.5 percent drop in core industries output for Oct’20 and a sharp 13 percent drop in consumptions (private+Govt) in 2QFY21, a meaningful recovery in Q3FY21 looks to be doubtful.

We note that consumptions have always played an important role over the years to support economic growth, hence a faster recovery in consumptions is of utmost importance.

Dhiraj Relli, MD & CEO, HDFC Securities

The Q2 GDP numbers came in as a big positive surprise. Though agriculture and services numbers came in a little below expectations, manufacturing growth has come in much stronger than expected.

This will entail revising downward the full-year GDP contraction forecasts.

The key thing to watch out for is the time services will take to come back to normal and whether manufacturing growth reflects restocking/pent up demand or is reflective of normal demand conditions which have revived sustainably.

Equity markets could open higher on Tuesday reflecting the positivity of the Q2 GDP numbers.

Pankaj Pandey, Head of Research, ICICI Direct

GDP decline of 7.5 percent for Q2FY21 was much better than consensus estimates of 8.5-9 percent contraction.

While the agri sector remained resilient, as expected, with a growth of 3.4 percent, the key surprise was on the manufacturing front which has sprung back above pre-covid levels.

It is pertinent to note that corporate performance had also echoed such a trend in Q2. Recovery was also partly aided by pent up demand from consumer and industrial restocking, in our view.

With a relatively stable festive season and lesser than expected economic damage so far, the economic growth recovery trajectory is likely to be accelerated.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services

Q2 GDP contraction at 7.5 percent is way ahead of expectations. The 0.6 percent expansion in manufacturing has come as a pleasant surprise.

If this trend sustains Q3 contraction will be very low and Q4 will post positive figures.

If so, the annual contraction can be around 6 percent. Sharp expansions in the first half of FY22 is on the cards.

A V-shaped recovery in FY 22 is in the realm of possibility. It is important to sustain the growth momentum"

Gaurav Garg, Head of Research, CapitalVia Global Research Limited- Investment Advisor

GDP data for Q2FY21 is better than expected. In my opinion, GDP data might impress Dalal Street as it has beaten most of the street estimates.

The agriculture sector grew by 3.4 percent, however, manufacturing and service both shed by more than 8% which shows that the full recovery has yet to happen in these sectors.

Going forward, we might witness steady and sustained improvement in GDP numbers.

Now the situation is improving, and the economy might be on track. Since the numbers are better than expected, this might add fuel to the already upbeat market sentiments.

S Ranganathan, Head of Research at LKP Securities

The contraction in GDP during Q2 at 7.5 percent was ahead of market expectation which was going in with a contraction of 9 percent.

Two-wheeler demand was robust and so was cement demand. Smart Investors were anticipating this which was evident in the sharp up-move of over 5 percent this week in the Nifty Midcap 50 and over 6 percent up-move this week in the Nifty Smallcap 100.

Trading Volumes on the Exchange today was at record highs. The data is in sync with Q2 earnings and commentary put out by several corporates.

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: Nov 27, 2020 07:16 pm
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