Third quarter GDP data strong but buoyant Indian market may have priced in growth | Top Vip News

The very strong third quarter GDP growth figures may provide much-needed immediate support to Indian stock market valuations, but may not provide any further trigger for the already buoyant indices. Additionally, markets may not be too enthusiastic about the GDP increase as the growth appears to have come on the back of rebasing and growth in net tax revenue without a supporting increase in GVA.

Fiscal third quarter data released by the Ministry of Statistics and Program Implementation on February 29 showed that GDP (gross domestic product) grew by 8.4 percent, much faster than the expected 6.5 percent. However, GVA (gross value added) growth of 6.5 percent for the third quarter was broadly in line with expectations.

GIFT Nifty was trading silent after the release of GDP data and was trading flat to slightly negative. The GIFT Nifty March futures contract was at 22,140, ​​down about 50 points from the close of the afternoon session.

“This GDP data could support valuations,” Deepak Jasani, head of retail research at HDFC Securities, told Moneycontrol. “In terms of valuations, we have been at a high level for some months now,” he said.

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NSE Nifty 50 has risen almost 10 per cent in the last three months. Markets ended on a cautious note on February 29, with the Nifty closing slightly higher at 21,983. The index is currently trading at a P/E of 23.45.

At these levels, markets have likely already digested current economic growth. “Current valuations are already factoring in fairly high growth and better-than-expected GDP numbers support growth. This justifies valuations remaining in the current buoyant zone,” said Pawan Bharadia, managing director, Equitree PMS.

“In the long run, it doesn’t make much difference to the markets,” said Sahil Kapoor, head of products and market strategist at DSP mutual fund, citing the revised base numbers as the reason for the strong GDP growth.

Additionally, strong data may result in the RBI’s rate cut cycle being postponed. “That can become a reason to take profits in the markets,” Jasani said.

Fixed income markets, which were eagerly waiting for a rate cut, may be disappointed as it may not happen immediately, said Marzban Irani, CIO-debt, LIC Mutual Fund. “People were expecting a rate cut probably in June; that could now be postponed until August,” Irani said. Expect yields to remain rangebound.

Looking ahead, investors will be watching how FIIs react tomorrow. While GDP may not have much impact, other reasons could weigh on markets, such as profit taking and reduced risk appetite, Jasani said. He said third-quarter earnings were mixed but generally comfortable.

He also expects earnings in the coming quarters to support stock valuations. “Maybe in the first quarter of next year there could be some setbacks due to elections and restrictions on government spending, but that was to be expected. Starting in the second quarter there would be a revival of momentum again,” he said.