Indian Indices Near All-time Highs, India's Slowing GDP Growth, and Top Stocks in Action

Tue, 4 Jun Pre-Open

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Indian share markets continued their momentum and ended their day on a strong note today.

Gains were largely seen in the power sector, metal sector, and capital goods sector.

At the closing bell, the BSE Sensex stood higher by 248 points (up 0.6%) and the NSE Nifty closed higher by 80 points (up 0.7%).

The BSE Mid Cap index ended up by 1.1%, while the BSE Small Cap index ended the day up by 1.8%.

Asian stock markets finished on a negative note as of the most recent closing prices. The Hang Seng stood down by 0.03% and the Nikkei was trading down by 0.9%, while the Shanghai Composite was trading down by 0.3%.

European markets were also trading on a negative note. The FTSE 100 was down by 0.2%. The DAX was trading down by 0.04%, while the CAC 40 was down by 0.07%.

The rupee was trading at 69.29 to the US$ at the time of writing.

Top Stocks in Action Today

Hero Moto Corp share price is likely to be in focus today after the company reported a 13.5% rise in sales to 652,028 units in May over the previous month. The company had sold 574,366 units in April 2019.

SpiceJet share price and InterGlobe Aviation (Indigo) share price will be in focus today today after Indian Oil Corporation slashed Aviation Turbine Fuel (ATF) prices.

India's GDP Growth Rate Worsens

In the news from the economy. India's gross domestic product (GDP) grew 5.8% in January-March, confirming fears of a slowdown, as the new government assumed office amid expectations of a wide-ranging policy impetus to turnaround the economy that is nursing multiple pain points.

"Real" or inflation-adjusted GDP grew 6.8% in FY19, lower than previous year's 7.2%, data released by the Central Statistics Office (CSO) showed.

The growth in GDP was slowest since FY15.

Slowdown signs have been visible since last year, with GDP growing 6.6% in October-December 2018.

The national income data have reinforced deceleration signs that were emanating from a slew of shop-end data, such as car and consumer goods sales, often seen as proxy indicators to gauge trends in household spending.

Fourth quarter corporate results have also shown a slowdown in profit growth across sectors. People are buying fewer cars and domestic sales, production and export of automobiles reflected this deceleration.

Similarly, growth in fast moving consumer goods (FMCG) have also slowed down considerably in recent quarters, mirrored in slowing sales of consumer staples, such as biscuits, soaps, oil.

One of the first tasks of the new government will be to usher in policies to boost people's spending, buoy demand. This, in turn, will prompt companies to investment more, add capacities to meet growing demand, and eventually, hire more people.

The new government will present its first central budget in the first fortnight of July 2019, amid heightened expectations that it will offer tax breaks to individuals and households, giving them more money to spend and save.

National income data showed that gross value added (GVA), which is GDP minus taxes, grew 5.7% in January-March 2019. It was 7.9% in the same quarter last year and 6.3% in October-December 2018.

GVA during FY19 grew 6.6% while it was 6.9% in FY18. GVA is a considered to be a more realistic proxy to measure economic activity.

The manufacturing sector grew 3.1% in January-March 2019, from 9.5% in the same quarter last year. For the whole year, the manufacturing sector stood at 6.9% in FY19 from 5.9% in FY18.

Factory output measured by the index of industrial production (IIP) contracted in March 2019, the first time in 21 months. This shows declining momentum of both investment and consumption.

Even core industries productions of steel, electricity, coal and cement are falling or have been stagnant in recent quarters.

The agriculture sector, which has been hit by falling farm produce prices and flat income growth, stood at -0.1% in January-March 2019 and 2.9% in FY19.

Over the last two years, farmers have been protesting in several states, demanding better prices and debt write-offs. Low retail prices may be heartening to consumers, but persistently low food prices, have meant that farmers' income have remained flat.

India's long slowdown in food prices may well be symptomatic of a problem of abundance. Low growth in farmers' income has been attributed to the BJP's loss in the Assembly elections of December 2018, particularly in Madhya Pradesh.

Procurement is taking place at higher prices only for 14 cereals by government agencies such as the Food Corporation of India (FCI). Vegetables, potatoes and onions however, are not procured by government agencies. That's why vegetable prices have crashed in wake of a plentiful harvest, the reports noted.

The new government has to quickly move on policies to raise farm incomes and also ensuring that retail inflation remains within the central bank's tolerable level of 4%.

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