Views on Q3 FY20 GDP numbers - Mr. Devarsh Vakil - HDFC Securities

Mr. Devarsh Vakil - Head, Advisory (PCG), HDFC Securities

The eight core industries recorded a 2.2% growth in January compared to 2.1% in previous month on the back of expansion in the production of coal, refinery products and electricity. Two back to back higher numbers after four months of abysmal performance gives us the confidence that economic scenario is turning on the road of recovery.

India GDP for Q3FY20 come in at 4.7% compared to 4.5% growth in second quarter. GVA growth during the third quarter came in higher at 4.5%, against 4.3% growth in July-September quarter. These numbers are broadly in line with expectations. This low rate of expansion was mainly due to weak manufacturing, falling exports and weak consumer demand. It is heartening to note that the growth numbers for Q2FY20 has been revised upward drastically.

The data suggests to us that the slowdown in the Indian economy has bottomed out and measures taken by the government in the recent budget to improve capacity to spend in rural sector, infrastructure creation and inviting foreign investments will boost growth going ahead.

Latest policy tools brought into use by RBI (LTRO) and postponement of Gilt maturities through operation twist have added significant monetary stimulus to the financial system.

The fast-spreading coronavirus outbreak will shave some points from global growth, though we expect a coordinated response from central bankers to unleash liquidity to counter the effects of slowdown. It should also add tailwinds to the growth recovery whenever the virus spread is contained.

Source : Equity Bulls

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