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Nifty posts consistent gains for the third month of November as GDP slips to 6-year low

Mumbai, December 5: There is a strange trend in the market where on the one hand economic growth is slowing down and on the other hand benchmarks are reaching record levels. Newly released GDP figures show India’s economy grew 4.5% for the September quarter (Q2), the benchmark Nifty has been steadily rising for the third month at the end of November. The Nifty has fallen 13% in the current calendar year to date, while second-quarter GDP numbers are at their lowest in 24 quarters.

It rose 2.3% in November, after posting remarkable gains of 3.5% in October and 4.1% in September. Nifty also managed to reach a new high in November, reaching 12,158 points. Nifty Bank rose nearly 7 percent largely thanks to the PSU banking index which rose more than 14 percent in November. On the other hand, from the 5 percent growth rate achieved in the first quarter (April-June), the GDP figure fell to 4.5 percent.

Amar Ambani, Senior President and Head of Research – Institutional Equities, YES Securities said, “The stock market has tended to decline over the past two trading days for a variety of reasons, including slippage in Q2 GDP numbers. , this will not change the trajectory in the medium term. for actions.

Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, said: “While market sentiment remains positive overall, there is some caution as well as the reservation of profits at higher levels. students. In addition, the weakness of the underlying economy (Q2GDP at 4.5 percent) along with slower earnings growth leaves limited room for improvement. However, the current momentum can be sustained in the short term thanks to strong cash flow and positive sentiment. “

“Going forward, we believe that fiscal policy will need to play a dominant role to support overall growth. The government could choose to deviate slightly from its budget deficit target for this year as well as for the next fiscal year, ”Ambani said.

With the growth rate falling below 5% and slowing the ramp-up, economy watchers expect the Reserve Bank of India (RBI) to opt for another 25 basis point rate cut ( BP) at its December Monetary Policy Committee (MPC) meeting.

Deepthi Mary Mathew, Economist at Geojit Financial Services, said: “All indicators ranging from IIP, electricity consumption to core inflation rate indicated that the economy had not entered on the path to recovery. reprise. The slowdown in consumption is indeed worrying, because its recovery is important for the recovery of investment. Private Final Consumption Expenditure (PFCE) fell to 5 percent year-on-year from 9.7 percent. With growth sliding to 4.5%, the RBI is expected to opt for the next round of rate cuts in December MPC. “

Ambani said that for FY20, our real GDP forecast stands at 5.2%, with further downside risks. After 135 base rate cuts issued by the RBI since February 2019, we expect the RBI to cut rates by an additional 25 basis points at the December MPC meeting, bringing the repo rate to 4. , 90%.

Commenting on the GDP slowdown, Dr Joseph Thomas, Director of Research at Emkay Wealth Management, said: “A stronger fiscal stimulus is needed to stem a further decline in GDP, without which it could be even lower in the approaching the next fiscal year. Measures to stimulate demand must be taken immediately, otherwise countercyclical actions may not bear fruit. “