The Nifty and the Sensex have opened with significant gains this morning after yesterday's market rout.
GDP figures released by the government yesterday turned out to be worse than economists' estimates.
Join us as we follow the top business news through the day.
Record GDP contraction: Analysts say lockdowns have had deeper impact than expected
Yesterday's GDP release turned out to be worse than what was expected by economists.
PTI reports: "The June quarter GDP contraction at 23.9 per cent -- the steepest ever on record -- shows that the impact of the lockdown has been “way higher than anticipated”, analysts said on Monday.
India’s performance is the third-worst among the over 50 countries which have come out with GDP numbers so far, and some analysts expect the remaining three quarters in the fiscal to show negative growth as well.
The Indian economy was facing challenges even before the onset of the COVID-19 pandemic and a host of measures, including deep rate cuts by the RBI and stimulus by the government, have been taken in an effort to arrest the slide since late March.
The GDP contracted by 23.9 per cent in Q1 FY21, with agriculture being the only bright spot in the economy.
”...the quantum of negative growth shows the impact of lockdown has been way higher than anticipated,” analysts at India Ratings and Research said.
The situation would have been far worse but for the banking, financial services and IT and IT-enabled services sectors which continued to operate in the lockdown, they added.
Analysts at Care Ratings said growth in the rural and agricultural economy will not be sufficient to compensate for the decline in urban demand and estimated the FY21 GDP contraction at 6.4 - 6.5 per cent.
Without sharing an estimate, India Ratings said the GDP will continue to contract in the remaining three quarters as well.
Their peer Icra said the 23.9 per cent contraction number can be revised downwards, when data on small businesses and the informal sector comes in, and maintained its negative 9.5 per cent growth estimate for the full fiscal.
It said there is a “wide discrepancy” between the double-digit growth of government final consumption expenditure on the expenditure side, and contraction in public administration, defence and other services on the production side, terming it as “rather incongruous”.
Singaporean bank DBS said the sharp de-growth in GDP is owing to the “stringent” lockdowns but the surprise drag was from the public administration, defence and other services segment which contracted likely due to a complete stop in the private sector.
It said fiscal push will carry a larger multiplier than easier financial conditions rendered by the RBI but added that the central bank will still lean towards rate easing in the second half of the fiscal year."
GDP contracts by record 23.9% in Q1
The Indian economy saw its worst contraction in decades, with Gross Domestic Product (GDP) shrinking by a record 23.9% in the April to June quarter in comparison to the same period last year, according to data released by the National Statistical Office on Monday
The contraction reflects the severe impact of the COVID-19 lockdown, which halted most economic activities, as well as the slowdown trend of the economy even pre-COVID-19. Economists expect this to contribute to a contraction in annual GDP this year, which may be the worst in the history of independent India.
“The Indian economy is in a deeply vicious cycle, where demand is contracting so heavily, while the capacity to neutralise this contraction has also contracted equally because of the tax revenue contraction. Therefore, I don’t see GDP returning to positive territory for six quarters, until the second quarter of next year,” said D. K. Srivastava, chief economist at Ernst and Young, and a Member of the Advisory Council to the 15th Finance Commission.
Sensex surges nearly 400 points in early trade; Nifty tops 11,500
Some much-needed recovery in the benchmark indices after yesterday's rout.
PTI reports: "The BSE benchmark Sensex jumped nearly 400 points in early trade on Tuesday tracking gains in index majors Kotak Bank, the HDFC twins and ICICI Bank amid mixed cues from global markets.
After opening on a choppy note, the BSE Sensex was trading 399.53 points or 1.03 per cent higher at 39,027.82; while the NSE Nifty was up 116.70 points or 1.02 per cent at 11,504.20.
IndusInd Bank was the top gainer in the Sensex pack, surging around 4 per cent, followed by NTPC, Tata Steel, Bajaj Finance, SBI, Asian Paints, M&M, Kotak Bank, the HDFC duo and Bajaj Finserv.
On the other hand, ONGC and ITC were the laggards.
In the previous session, Sensex plunged 839.02 points or 2.13 per cent to 38,628.29, while the Nifty tanked 260.10 points or 2.23 per cent to end at 11,387.50.
Exchange data showed that foreign institutional investors sold equities worth Rs 3,395.49 crore on a net basis on Monday.
According to traders, market shrugged off the slump in GDP and weak global cues by rebounding around 1 per cent after previous session’s low. Buying in financial stocks lifted key benchmarks.
India’s economy suffered its worst slump on record in April-June, with the gross domestic product (GDP) contracting by 23.9 per cent as the coronavirus-related lockdowns weighed on the already-declining consumer demand and investment.
Bourses in Shanghai and Seoul were trading with significant gains in mid-day deals, while Hong Kong and Tokyo were in the red.
Stock exchanges on Wall Street ended on a mixed note in overnight session.
Global oil benchmark Brent crude was trading 1.04 per cent higher at USD 45.75 per barrel."
Funskool to focus on domestic market, says CEO
Buoyed by the Prime Minister’s (PM) call for developing innovative ‘toys and games’ in India for making the country a global toy hub, a leading toy manufacturer said that it saw a bright future for the sector.
“The PM’s speech focussed more on the Indian toy sector and this will give a fillip to domestic toy manufacturing companies,” R. Jeswant, CEO, Funskool (India) Ltd. told The Hindu.
“We see a bright future for the Indian toy manufacturing firms and the country can be a hub for the industry as a lot of initiatives are set to follow the PM’s speech,” he added.
Since April, Funskool exports had grown exponentially following a surge in sourcing by international majors. However, the domestic volume was impacted by the pandemic. Currently, the company exports about 60% of its production. Going forward, it would strive to keep it 50:50 (domestic production and exports). Funskool has has three units — one in Goa and two in Ranipet in Tamil Nadu.