India Q4 GDP: Has the market priced in lower growth? How can Q4 GDP print influence market mood?

India's Q4FY23 GDP (gross domestic product) data is expected to be in the range of 5-5.5 per cent. The GDP data for the March quarter is set to be released by the National Statistical Office (NSO) on Wednesday (May 31) and experts and market participants expect that the country's GDP may surpass the first advance estimate of 7 per cent by the NSO.

According to the Reserve Bank of India (RBI) Q4 estimates, India's real GDP growth will stand at 5.1 per cent in the previous quarter. For 2023-24, GDP growth will stand at 6.5 per cent.

Economic trends and available data indicate that India remains one of the fastest-growing large economies in the world at a time when Western countries are grappling with concerns of a recession. However, the country's growth is expected to be in the lower range because of global factors.

According to a Mint poll, 18 economists expect the Indian economy to rise in the January-March quarter, but growth will remain uneven in different sectors.

Brokerage firm Nirmal Bang peg GDP growth for Q4FY23 at 5.2 per cent, marginally higher than its earlier estimate of 4.8 per cent. GVA growth is expected at 5.3 per cent, said the brokerage firm.

"With Q4FY23 GDP expected to come in slightly better than our initial estimate, we are maintaining our FY23 GDP estimate at 7.2 per cent and our GVA estimate at 6.9 per cent," said Nirmal Bang.

Read more: India's Q4 GDP data to be out today. Here's is what to expect

How can the market react to GDP numbers?

By definition, GDP is the market value of all the final goods and services produced within a country's borders in a specific time period. As it is the measure of the size and health of an economy, GDP numbers are crucial for market participants.

Analysts do not expect a strong market reaction to the GDP numbers as they are expected to be in the range of 5 per cent or slightly above it. A major upside or downside, however, may see some movement accordingly but in-line numbers will reinforce faith in the Indian economy and underpin the market sentiment.

G.Chokkalingam, Founder and Head of Research at Equinomics Research Private Limited does not think that the lower GDP number will impact the mood of the market since the market has already discounted a lower growth.

"Lower GDP growth in Q4FY23 is unlikely to impact the markets. It is already discounted as lower growth was already expected by many institutions. Moreover, IIP (index of industrial production) and core sector growth of Q4 FY23 already gave enough signs," said Chokkalingam.

Chokkalingam is positive about the economic growth of the country going ahead which, in his view, will underpin market sentiment.

"Further expectation of over 6.5 per cent growth for FY24, normal monsoon forecast, robust service sector’s exports and capex (capital expenditure) by government, the record level of food grains expected, etc., along with some indicators like robust freight volumes by railways and ports, and robust banking credit growth, etc., would give a lot of optimism to the domestic equity markets in the short term," said Chokkalingam. In his view, a major failure of monsoon and possible war in Taiwan alone can derail markets in the short term.

Read more: Why stock market investors should look at auto shares ahead of India's GDP data release?

On a similar line, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services pointed out that the markets have already discounted a 5.5 per cent GDP growth for Q4 FY24 and 7 per cent GDP growth for FY24. Vijayakumar believes if the actual numbers come above that, it can be mildly positive.

He said the present optimistic mood in the market is driven by sustained FPI (foreign portfolio investor) flows. Improving growth prospects, good prospects for corporate earnings and declining inflation with the expectation of a rate cut by the end of 2023 are providing fundamental support to the market rally.

Tanvi Kanchan, head of corporate strategy at Anand Rathi Shares and Stock Brokers believes the Indian economy may have grown by 5.5 per cent in the January – March 2023 quarter despite multiple global headwinds.

"India continues to outshine its peers, even as per the latest 'Monthly Economic Review' report by the Finance Ministry, companies have started investing in new capacity, buoyed by sustainable growth in activity. FII activities have also shown a positive net inflow after being net sellers last year," said Kanchan.

She pointed out that India's GDP growth comes amidst a backdrop of global economic slowdown, and recessionary pressures in several countries. Global challenges and a combination of geopolitical tensions, climate-related shocks, increased debt servicing obligations due to rising interest rates, and money and currency market upheavals, among others.

Kanchan said the government's focus on capital expenditure, capacity utilisation above the long period average and moderating commodity prices are expected to boost manufacturing and investment activities.

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Disclaimer: The views and recommendations given in this article are those of individual analysts and brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.