Dismal GDP Growth Is a Huge Dampner - Karvy

The BSE Sensex tanked 455 points on Friday-the biggest single day fall in 14 months over fears that the RBI may not soften interest rates anytime soon. It's a valid fear. GDP growth numbers for the last quarter, although on expected lines, dipped to 4.8%. The 5% mark had been widely touted as the New Hindu Growth rate, or the base fi gure below which a country of India size and aspiration could simply not afford to slip. Two consecutive quarters of below 5% growth is a defi nite cause for concern for the RBI. But what is even more worrisome in private spending beginning to taper. Private spending grew 3.8% during the quarter. That was slower than 4.2% last quarter. Consumer confi dence weakening further would be very bad news indeed. The poor GDP number flattened the market morale further after RBI Governor Duvvuri Subbarao indicated that retail infl ation and current account defi cit were still pretty high for comfort.

Finance Minister Palaniappan Chidambaram however put up a brave front and tried to dispel fears of dismal GDP growth for the entire year. He said he was confi dent India can grow by 6 percent or more in 2013-2014. Capital-goods growth, a bellwether of investments on factories and machinery, fell for nine of the 12 months. FDI came down 21% to $36.9 billion. Indian gold futures hit their highest level in a month on Friday on a weak rupee, denting physical demand as jewellers and other buyers were on the sidelines.

For the week, the Nifty started with fi rm tone and tested its key resistance of 6130 level couple of times. But, the sharp sell-off on Friday has wiped out all the gains of the week and fi nally settled fl at W/W. The Consumer Durables, Auto, IT, FMCG and Pharma sectoral indices have seen a healthy participation, outperforming the broader markets. On the other hand, Realty, Banking, Capital Goods and Metals sectoral indices have seen a sharp sell-off and underperformed the benchmark indices. Long positions can be assumed in select IT, Pharma, FMCG and Consumer Durables stocks if the Nifty sustains above 6000 levels in the coming week. Short positions can be accumulated in Auto, Banking, Capital Goods, Cements, Metals and Energy stocks if the Nifty slips below 5950 levels. Overall, we expect Nifty to trade in the range of 5850-6100 levels for the next week.

Source : Equity Bulls

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