Benchmark indices opened the day higher tracking economy's surprising growth at 7% in the October-December quarter reducing fear of any major impact of PM Narendra Modi’s surpeise demonetisation move. Though the Fiscal Deficit for April-January 2017 overshooting the Budget estimate for the full year capped the gains.
At 9:17 am, the S&P BSE Sensex was trading at 28,864, up 121 points, while the broader Nifty50 was ruling at 8,904, up 25 points.
In the broader market, BSE Midcap and BSE Smallcap gained 0.4% and 0.5% respectively.
"Although immediate positive trend is intact but now only if Nifty sustains above 8,850 zones the upside rally may continue. Holding above 8,920 zone may take the index towards 9,000 then 9,050 levels but on the downside if it drifts below 8,850 then a further decline towards 8,800 and 8,740 zones may be seen," said Anand Rathi Technicals in a note.
HeroMoto Corp, Axis Bank, PowerGrid and ONGC were the top gainers on BSE Sensex while Tata Motors was the biggest laggard, down 0.5% ahead of Feb Auto sales numbers.
Q3 GDP at 7% beats note ban blues
Gross domestic product (GDP) for the third quarter (Q3) of financial year 2016-17 (FY17) grew at 7%, allaying fears of any major effect of demonetisation though it was the lowest expansion in four quarters.
The Q3 numbers not only made India the fastest-growing large economy in the world but also helped the Central Statistics Office (CSO) retain its earlier projection (in first advance estimates) for full-year GDP growth at 7.1% in the second advance estimates released on Tuesday.
"Although impact of demonetisation looks muted on overall numbers due to changed base, it is more visible in financial sector which slumped to 3.1% YoY. Real GDP growth was 40 bps higher at 7.0% YoY. Importantly, capital formation as suggested by Q3 and Q4 data show a positive growth which contradicts the decline in government capital outlay and continued delayed in private capex," said Dhananjay Sinha, Head of institutional research, economist and strategist at Emkay Global Financial Services.
Adding: "Deflator in Q3 and Q4 suggests rising inflationary pressures resulting in higher nominal GDP growth of 10.6% YoY and 12.7% respectively. Importantly, revisions have implied lowering of H1FY17 GVA growth to 6.8% YoY vs 7.2%, with this the advance estimate for FY17 now stands at 6.7% YoY vs 7.0% earlier."
Meanwhile, OECD has cut India’s growth forecast for this financial year to 7% from 7.4% earlier because of demonetisation, but said the pace will accelerate to 7.3% next financial year and go even higher in FY19.
Fiscal deficit overshoots full-year target
India’s fiscal deficit touched Rs 5.64 lakh crore at the end of January, 105.7% of the full-year target, mainly due to lower realisation of non-tax revenue.
The fiscal deficit, reflection of government borrowing to meet revenue-expenditure gap, was 105.7% in the 10-month period of 2016-17, compared to 95.8% in the similar period last financial year.
The government had budgeted a fiscal deficit of Rs 5,33,904 crore for the current financial year ending March.
Core sector growth slows down to 5-month low
January Core sector growth slipped to a five-month low of 3.4% dragged by output of refinery products, fertiliser and cement sectors.
The growth rate of eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity was 5.7% in January 2016.
Infrastructure sectors’ expansion in January this year is the lowest since August 2016, when the segments had recorded a growth of 3.2%. It is also lower than that of 5.6% seen in December 2016.
Global Markets
Asian markets were mixed in early trade following Wall Street which snapped its 12-day gaining streak last night.
On Wall Street, Dow Jones closed 25.20 points, or 0.12%, down at 20,812.24 while S&P 500 lost 6.11 points, and Nasdaq Composite Index closed 36.46 points lower.