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Share Markets in India Open Marginally Lower as Q4 GDP Data Disappoints
Thu, 1 Jun 09:30 am

Asian equity markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.39% while the Hang Seng is up 0.45%. The Nikkei 225 is trading higher by 1.03%. US stocks closed flat as financials dropped after JPMorgan and Bank of America warned of revenue weakness.

Meanwhile, share markets in India have opened the day on a flat note with a negative bias. The BSE Sensex is trading lower by 32 points while the NSE Nifty is trading lower by 10 points. The BSE Mid Cap and BSE Small Cap index have opened the day up by 0.3% & 0.4% respectively.

Barring information technology stocks, energy stocks and bank stocks, all sectoral indices have opened the day in green with healthcare stocks and auto stocks leading the gainers. The rupee is trading at 64.55 to the US$.

As per the data released by Central Statistics Office (CSO), Gross Domestic Product (GDP) in the January-March quarter grew at the slowest pace in at least four quarters at 6.1% as against a 7% growth in October-December.

The GDP growth, with revised series, was dragged down by construction, manufacturing and trade services thereby stripping the country of its status as the world's fastest-growing major economy. Annual economic growth at 6.1% was lower than China's growth of 6.9% for the first three months of 2017.

The expansion was much slower than the 6.5-7.8% forecast by analysts, and below the provisional 7% growth reported in the previous quarter.

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During the reporting quarter, the agriculture, forestry and fishing sectors grew at 5.2%; mining and quarrying at 6.4%; manufacturing at 5.3%; electricity, gas, water supply and other utility services at 6.1%; trade, hotels, transport and communication at 6.5%.

While financial, real estate and professional services grew over at 2%; and public administration, defence and other services at 17%. However, the construction sector shrank 3.7%.

Surely, the lower-than-anticipated fourth quarter GDP number reflects the lingering impact of demonetization, as predicted by economists. They believe that the sharp expansion in government consumption expenditure in January-March has in fact bolstered GDP growth from an even sharper slowdown.

China Way Ahead of All Emerging Markets

While we have serious reservations about India's GDP numbers, we have no doubt that India is doing much better than other emerging economies. The above chart throws up a startling revelation. As per an article in Livemint, apart from China and India, the rest of the emerging economies have not done very well.

India's share grew from 3.9% to 7.2% of world GDP over the last twenty years. That's just a 3.3 percentage point increase.

Just this one statistic tells us how much India needs to grow if we are to catch up with China. In fact, there's a strong argument which indiactes we may never catch up with China. However, we are confident that even if we don't match China, there will be many opportunities to create wealth in the Indian markets.

For those investing based on macro clues, these are times to be a little skeptical. What you see could be too good to be true. It could also be a very slippery premise for one's investment thesis. Ask superinvestors who have consistently beaten benchmark indices.

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Our research analysts Kunal and Rohan have been working on a project to answer this. They have travelled the length and breadth of the country to interview a bunch of value-oriented investors who've had tremendous success with investing.

To get an insight, download your free copy of The Super Investors Of India today.

Pharma stocks opened the day on a mixed note with Elder Pharma and Dishman Pharma leading the gainers. As per an article in a leading financial daily, the US arm of Sun Pharma is recalling over 13,000 bottles of antihistamine, Children's Cetirizine Hydrochloride chewable tablets, from the American market for failed specifications.

Reportedly, the ongoing class III recall is nationwide in the USA and Puerto Rico. A class III recall is initiated in a situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.

Meanwhile, in an edition of The 5 Minute WrapUp, we wrote about the USFDA crackdowns faced by the Indian Pharma in the recent times and how they have been constantly investing towards R&D. We believe pharma companies that are upgrading and keeping facilities compliant, and have niche product pipelines in place will see sustained revenue growth going forward.

Moreover, the revenue growth for Indian pharma industry remains moderate with base business in US continuing to face high single digit price erosion, regulatory overhang for select companies and temporary demonetisation effects in India.

Sun Pharma share price opened up by 2.6%.

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Nov 23, 2017 09:25 AM