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New Delhi
Wednesday 29 January 2020

GDP figures stun investors; market loses momentum

Even before the government could release the GDP figures for the second quarter, the SBI prediction of a 4.2% growth rate spooked the market

The GDP figures for the second quarter of the current financial year i.e. July-September are out. India grew at a modest 4.5% in the second quarter of the fiscal. It was estimated that the GDP rate in this quarter would be between 4.3% and 4.7%, less than the psychologically better 5% in the first quarter.

Before the government data were published, the market witnessed strong selling on the last trading day of the week due to the State Bank of India prediction of a 4.2% GDP growth rate. The Sensex fell 336.36 points to close at 40,793.81 at the end of trading while the Nifty dropped by 95.10 points to settle at 12,056.05.

During the trade, the Sensex fell by over 400 points. On Thursday, the Sensex and Nifty had touched the highest level ever. Yesterday, the Sensex crossed 41,163 points and the Nifty reached the highest level of 12,158.80 points.

Fear of fall in GDP

Sources in the Finance Ministry believe that the core sector and IIP have been in a very bad condition in the two months of the July-September quarter, which had had an impact on the growth rate of the gross domestic product (GDP). They say there is an atmosphere of fear among the investors.

During the first quarter of 2019-20, India’s economy grew at a rate of 5%, which was the lowest in the last six years.

The country’s largest state-run bank, the State Bank of India, had earlier released a report that had estimated GDP growth to be only 4.2% in the second quarter. The bank considers this to be a result of four factors, given as under.

  1. the low automobile sales
  2. the slowdown in air traffic
  3. the poor condition of the core sector
  4. the decline in construction and infrastructure investment

According to the report, the growth forecast for FY 2020 has now come down from 6.1% to just 5%.

As for the BSE Index, Yes Bank’s share fell in value the most at the end of trading. Shares of HUL, Mahindra, SBI, Tata Motors, Vedanta, Reliance and Axis Bank collapsed, too.

However, shares of Airtel, HDFC Bank and NTPC fared better.

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