Macro-data will dictate market trend
The Sensex advanced 314.74 points to settle at 36009.84 while the Nifty gained 67.6 points to close at 10794.95 for the week that ended on Friday, 11 January 2019.
On macro-economic data, the Nikkei Manufacturing Purchasing Managers’ Index (PMI) compiled by IHS Markit plunged to 53.2 in December 2018. The government estimates gross domestic product (GDP) growth at 7.2% in FY2018-19 as against 6.7% in FY2017-18.
Growth in real GVA at basic constant prices (2011-12) was expected at 7% in FY2018-19 as against 6.5% in FY2017-18. The sectors that are estimated to register over 7% growth include electricity, gas, water supply and other utility services, construction, manufacturing, public administration, defence and other services. The ‘January 2019 Global Economic Prospects’ report released by the World Bank forecasts India’s GDP to grow at 7.3% in FY2018-19 and 7.5% in the following two years attributing it to an upswing in consumption and investment. China’s economic growth is projected to slow down to 6.2% in 2019 and 2020 and 6% in 2021. In 2018, the Chinese economy is estimated to have grown by 6.5% v/s India’s 7.3%.
“In 2017, China with 6.9% growth was marginally ahead of India’s 6.7% mainly because of the slowdown in the Indian economy resulting from demonetisation and implementation of the GST,” the report said. “India’s growth outlook is still robust. India is still the fastest growing major economy,” said Ayhan Kose, World Bank Prospects Group Director.
“The fact that the Indian economy is able to deliver growth slightly above its potential is a very good sign. India’s growth performance is quite impressive. Year after year, it has delivered strong numbers around its potential growth,” he added. Private consumption is projected to remain robust and investment growth is expected to continue as the benefits of recent policy reforms begin to materialize and credit rebounds. Strong domestic demand will widen the current account deficit (CAD) to 2.6% of GDP next year. Inflation is projected to rise somewhat above the midpoint of the RBI’s target range of 2-6%, mainly owing to energy and food prices. According to the ‘PwC-FICCI India Manufacturing Barometer: Building Export Competitiveness’ survey, the GST is a step in the right direction and will usher in growth and investment in the country. It expects the Indian economy to grow at an average rate of 7% or more in the coming year. Mohammad Athar, Partner and Leader, Industrial Infrastructure at PwC, said “GST is an enabler of growth which will impact both domestic markets and export growth. Despite the initial implementation hurdles, India Inc. is positive and will improve with time and benefit in the long run.” Puneet Dalmia, Chairman of FICCI Manufacturing Committee and Managing Director, said “Despite being the sixth largest economy in the world soon to take over the UK to be the fifth, India over relies on its domestic markets. India is a very large domestic market, very small portion is export and people invest in India primarily to cater to the domestic market. That should change over time. India is still under 2% of global exports and we need to have a larger market share in exports.”
K Georgieva, World Bank CEO, said “At the beginning of FY2018, the global economy was firing on all cylinders but it lost speed during the year and the ride could get even bumpier in the year ahead.”
USA and China have been engaged in a bitter trade dispute, which has jolted financial markets across the world for months. The two economies have imposed tit-for-tat duties on each other’s goods although there were signs of progress as the two countries prepared to enter talks in Beijing last week. According to the World Bank, growth in USA is likely to slow down to 2.5% in 2019 from 2.9% last year.
The World Bank projects emerging market economies to grow at 4.2% in 2019 and advanced economies to grow at 2%. Key index rallied on Monday, 7 January 2018, on positive buying of equities. The Sensex closed 155.06 points higher at 35850.16.
Key index gained on Tuesday, 8 January 2019, ahead of Q3 results of companies. The Sensex closed 130.77 points higher at 35980.93.
Key index surged on Wednesday, 9 January 2019, on extended buying by market participants. The Sensex closed 231.98 points higher at 36212.91.
Key index fell on Thursday, 10 January 2019, on US government shutdown cues. The Sensex closed 106.41 points lower at 36106.5.
Key index settled lower on Friday, 11 January 2019, on global cues. The Sensex closed 96.66 points lower at 36009.84. National and global macro-economic figures will dictate the movement of the markets and influence investor sentiment in the near future. On the Rupee scenario, market participants will closely watch the Indian rupee trend against the US Dollar.
The government will release data based on WPI and CPI for urban and rural India for December 2018 by mid-January 2019. The RBI’s next monetary policy review meet is scheduled on 5 February 2019.