Macro-data will dic­tate mar­ket trend

Money Times - - Market Review - By Deven­dra Singh

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.

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