GDP numbers to act as cushion against market volatility in the immediate term; sustained impact unlikely, opine analysts after India reports 8.4% YoY jump

India's Gross Domestic Product (GDP) for the second quarter of the financial year 2021-22 jumped 8.4 per cent as compared to a 7.4 per cent contraction in the same period a year ago and was in line with the estimates of brokerages and analysts. In Q1FY22, GDP growth stood at over 20 per cent on a lower base. 

The overall market on Tuesday witnessed steep volatility, and Nifty50 gave up the key level of 17000-mark, similarly, Sensex declined over 1000 points from day’s high level at the market close. 

Amid such volatility, the market analysts don’t see the GDP number to have much of an impact on the market. They however opine that it could mitigate some ongoing volatility of the stock markets. 

TradeSwift Director Sandeep Jain expects the market losing key level is not a good sign and GDP numbers may give some cushion.  

The market analyst says, the market would see more decline going forward and it would slip more by 300-400 points. Jain mentions, “we say a level of 16300-400 support and 17200 as resistance.” 

Nish Bhatt, Founder & CEO, Millwood Kane International pointed out, “The Q2 GDP data at 8.4 per cent is in line with most estimates, this pegs the H1FY22 growth at 13.7 per cent. The recovery has been broad-based with most components contributing to growth.” 

Bhatt added, “Mining, construction, real estate showed considerable growth. A good monsoon year reflected well with high agricultural output.” 

“The private consumption is likely to pick up as we near complete normalization. The private capex will likely catch up with government spending and aid growth further,” the analyst said. 

“The GDP growth was at 8.4 per cent, as per expectations. One surprise was the lower growth in the manufacturing sector. Seems to suggest that the output gap is not narrowing as swiftly,” Sandeep Bagla, CEO, TRUST Mutual Fund.  

The MPC meeting in December will have to consider the growth in GDP as well as the possibility of slowdown due to the new virus strain, Bagla said in a comment over GDP numbers. 

Similarly, Choice Broking Executive Director Sumeet Bagadia says, the market volatility may continue further amid third wave concerns of Omicron — a new variant of Covid-19. The GDP numbers may act a cushion but won’t have much impact on the market on Wednesday as it looks overall weak. 

Bagadia adds, the support level for Nifty is at 16900-16950 and resistance is at 17200 level. 

“The September-quarter real GDP growth at 8.4 per cent was in line with consensus expectations. A large part of the growth upside was driven by the public administration, education, health, etc. segment which saw sharp increase in momentum as well as a favourable base effect,” Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities said.  

“Growth should remain fairly well supported in Q3FY22 too on account of festive season and opening up of services sector too. Growth remains well on track for a full year growth of around 9.5 per cent. The growth numbers will unlikely play a differentiating factor for the RBI’s policy with its own estimate being at 7.9 per cent,” the market analyst said. 

While Care Ratings mentioned that the demand and investments are yet to see a meaningful and durable pick-up and improvements in these are expected to be limited and gradual given that even before the pandemic, the domestic economy was grappling with low demand and subdued investment climate.