Markets likely to make optimistic start as Q4 GDP data beat expectations

Indian equity benchmarks closed sharply higher on Thursday on eve of expiry of May series derivative contracts. Today, the markets are likely to make optimistic start as Q4 GDP data beat market expectations. Indian economy grew at 7.7 percent during January-March quarter of financial year 2017-18 compared to 6.1 percent a year ago, driven by gains in manufacturing and consumer spending. However, the GDP growth for the entire fiscal of 2017-18 was at 6.7%, lower than 7.1 percent in 2016-17. Traders will also get some support with report that eight infrastructure industries recorded 4.7 percent growth in April helped by healthy performance in segments like coal, natural gas and cement. The growth rate of eight core sectors, which also include fertilisers and steel, was 2.6 percent in April 2017. Some support may also come with report that Fiscal deficit for 2017-18 worked out to be 3.53 per cent of the GDP, broadly in line with the government’s revised estimates. The revenue deficit was 2.65 per cent of the GDP. In absolute terms, the fiscal deficit was Rs 5.91 lakh crore or 99.5 per cent of the Budget estimates. Some optimism will also come with Moody's Investors Service’s statement that tax reforms are likely to expand revenue base in fast growing economies like India but they will be most effective when accompanied by lowering of fiscal deficit and effective management of expenditure. Traders will also get some encouragement with report that India’s per capita income grew at a slower pace of 8.6 per cent to Rs 1,12,835 during the last fiscal ended March 2018. The per capita net national income in 2016-17 stood at Rs 1,03,870, witnessing a growth of over 10.3 per cent from the preceding fiscal ended March 2016 (at Rs 94,130).

The US markets ended lower on Thursday following news that the Trump administration plans to impose steel and aluminum tariffs on Canada, Mexico and the European Union. Asian markets are trading mostly in green in early deals, as the political turmoil in Italy that roiled global financial markets showed signs of easing.

Back home, May F&O expiry session turned out to be a fabulous day of trade for Indian equity benchmarks with frontline gauges recapturing their crucial 10,700 (Nifty) and 35,300 (Sensex) levels, on the back of predictions of normal southwest monsoon rains and expectations of an improved gross domestic product data due later in the day. The markets’ mood remained up-beat throughout the day and benchmarks fervently gained from strength to strength, as investors continued hunt for fundamentally strong stocks. Key gauges made an optimistic start with traders taking some encouragement with report that India is likely to retain the position of world’s fastest growing major economy in the January-March quarter, surpassing China’s growth of 6.8%, driven by gains in manufacturing and consumer spending. The poll on the latest quarter’s annual growth was 7.3%, the best pace since July-September 2016, the quarter before the government unexpectedly scrapped high-value currency notes. Investors took note of a report that India will endeavour to have a ‘balanced’ Regional Comprehensive Economic Partnership (RECP) trade agreement as it would cover 40% of the global GDP and over 42% of the world’s population. Adding to the optimism, commerce and industry minister Suresh Prabhu said that India will pitch for continuing the eligibility of its 3,500-odd goods for low or zero duties in the US. Markets extended gains in last leg of trade as traders covered-up of pending short positions on expiry of the May derivatives contracts. Sentiments also remained up-beat with SBI research report, where it expecting GDP growth for Q4FY18 to be around 7.6% and the FY18 growth to be at 6.7%. It also said that the GDP growth for Q4 and FY18 is likely to spring a positive surprise. Some support also came with report showing that the country’s special economic zones (SEZs) grew 5.44% in April to Rs 20,548 crore as against Rs 19,488 crore in the same month a year ago. According to Export Promotion Council for EOUs & SEZs (EPCES), highest growth in outward shipments was recorded from the Cochin SEZ which witnessed a 704% jump from Rs 461 crore in April last year to Rs 3,708 crore this year. Finally, the BSE Sensex surged 416.27 points or 1.19% to 35,322.38, while the CNX Nifty was up by 121.80 points or 1.15% to 10,736.15.