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Q2 GDP prints likely to show significant sequential pullback; will it cheer the market?

Care Ratings estimates the contraction in the July-September of this fiscal year, to be 9.9 percent, while rating agency ICRA estimates it to be 9.5 percent.

November 27, 2020 / 04:27 PM IST

India's September quarter GDP prints are expected on November 27 and analysts expect a significant sequential rebound in the numbers even as they may remain in the negative.

The second-quarter growth expectations are significantly better than that in Q1 with the unlocking mode being on across the country.

A poll conducted by CNBC-TV18 showed 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.

Care Ratings estimates the contraction in the July-September of this fiscal year, to be 9.9 percent, while rating agency ICRA estimates it to be 9.5 percent.

As per a BofA report, the Indian economy is likely to have improved in the second quarter with GDP printing in at -7.8 percent as against 24 percent contraction in the June quarter.


India’s GDP contracted by a whopping 23.9 percent contraction in the April-June quarter, which was primarily the months of a nationwide lockdown due to the COVID-19 pandemic.

However, since then, a number of high-frequency indicators have shown gradual signs of pick up, pointing towards overall economic recovery in the country. By September in fact, indicators like vehicle sales, real estate, manufacturing PMI, and railway freight earnings, had outstripped September 2019.

The IHS Markit Manufacturing PMI rose to 58.9 in October, the highest in more than a decade, compared to 56.8 in September, driven by robust sales. State Bank of India (SBI) revised their second-quarter GDP projection to a contraction of 10.7 percent from a contraction of 12.5 percent earlier, according to a research report from SBI Ecowrap.

With improving economic indicators, analysts, rating agencies and global brokerages have revised their GDP forecasts and almost all have indicated a strong rebound in FY22.

Global brokerage firm Jefferies has revised India's FY21 GDP forecast to -7.1 percent From -8.4 percent earlier.

Jefferies sees FY22 GDP growth rebounding to 13 percent to factor in encouraging trends.

Impact on the market

While the market will keenly observe the improvement in GDP prints, it may not impact the mood of the market significantly as the negative prints and sequential improvement are already factored in, analysts said.

More than the GDP numbers, how the COVID-19 situation pans out in the coming future is important for the market at this juncture as rising COVID-19 cases can derail the economic improvement.

"Q2 GDP may not change the mood of the market as everyone has built in the negative impact and the sequential recovery that is likely to come through," said Rusmik Oza, Executive Vice President and Head of Fundamental Research-PCG at Kotak Securities.

Oza pointed out that the market is way ahead of the economy in terms of valuing stocks. Everyone is now focussing on FY22 numbers and valuing stocks accordingly.

"Going ahead, we need to watch the impact of second-wave and fresh partial lockdown measures being taken by various states. Any prolonged impact of second-wave could impact the recovery of GDP and to that extent marginally impact the market in near future," Oza said.

Jyoti Roy- DVP- Equity Strategist, Angel Broking believes that markets will focus more on high-frequency indicators like PMI, auto sales and power demand which point to a significant acceleration in the economy from October due to festive demand and opening up of the economy.

"PMI and auto sales numbers for the month of November are expected in the first week of December which we believe will be more crucial for the markets,” Roy said.

Experts believe that a negative surprise in GDP numbers may have a slight impact on the market and there may be some correction.

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 09:02 am
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