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Informist, Friday, Nov. 29, 2024

By Anjana Therese Antony

MUMBAI – A surprisingly sharper-than-expected slowdown in India's economic growth, coupled with other near-term cues, are likely to keep gains in the domestic equity market under check next week, two analysts said. India's GDP during the September quarter shockingly slumped to a seven-quarter low of 5.4% due to the weakness in growth of industrial activity. This was also slower than the consensus of 6.5% economists polled by Informist had expected. The data was disappointing, but not alarming, Chief Economic Adviser to the Government V. Anantha Nageswaran said after the quarterly GDP data was released Friday. 

"The sharply lower-than-expected GDP figures reflect the highly disappointing corporate earnings data," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said in a note Friday. The manufacturing sector appears to have taken the maximum beating, Bhardwaj added.

Though the recent correction in the stock market brought valuations to a "somewhat better levels", analysts believe equities are still expensive in India and that returns from the market would be lower in the medium term. There have been signs of increasing bearishness towards the Indian market, such as the sharp outflow of foreign investments and rising short positions by FIIs in index futures. The slowdown in corporate earnings growth, earnings downgrades, worries about a delay in interest rate cuts in the US as well as India, and aggravated geopolitical tension among Russia-Ukraine and Iran-Israel also added to the woes. 

The Nifty 50 closed 0.9% higher at 24131.10 points and the BSE Sensex ended 1% higher at 79802.79 points. The near-term support for the 50-stock index is pegged at 24050-23970 points and resistance at 24280-24350 points, technical and derivatives analysts at two broking firms said. Both the indices closed higher for the second consecutive week, gaining nearly 3% each during this period. 

Investors also await the monetary policy outcome of the Reserve Bank of India due next week. Goldman Sachs expects the apex bank to keep the policy rate unchanged at 6.50%, retain its 'neutral' stance, and re-iterate its commitment of bringing inflation to the target of 4%. The broking firm also said the RBI's take on banking system liquidity will be a key matter to look out for, which was tightened recently. "We expect the RBI to actively manage liquidity to realign the inter-bank rate with the repo rate, going forward," it said in its report Friday. 

The central bank, on multiple occasions, had said that it will not necessarily look at the interest rate decisions in the US to decide on domestic rates, but India's inflation data and economic growth.

The monthly automobile sales data will also be closely watched by investors, due Sunday. The November wholesales are likely to be a mixed bag, with growth in commercial vehicles and muted performance in other segments expected, Nuvama Institutional Equities said in its research report. Within the commercial vehicles segment, original equipment manufacturers are likely to do well and in the two-wheeler space, TVS Motor Co. may outpace its peers, the broking firm said. 

Among specific stocks, Larsen & Toubro could be under the focus as the company got penalties worth INR 1.73 billion. Rail Vikas Nigam may also be under the focus as the company emerged as the lowest bidder for a distribution infrastructure work in Punjab, the cost of which would be INR 6.43 billion.  End

Edited by Akul Nishant Akhoury

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