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Chartbook on Indian economy + Q1FY24 GDP: Exports & Non-govt. capex weak

1 Sep 2023 , 10:37 AM

  • Analysts of IIFL Capital Services chartbook covers Q1FY24 GDP and general economy and markets. In Q1, real GDP accelerated to 7.8% YoY vs 6.1% in Q4 – in line. Demand growth was led by investments (seems entirely govt. driven), consumption saw a pick-up and sharp exports decline dragged growth. Sectorally, Construction and Services shone, Mfg again struggled and Agri slowed. Global slowdown is still the major risk – analysts of IIFL Capital Services are slightly below consensus at 5.8% GDP growth for FY24.
  • Q1 GDP accelerates as expected; GDP deflator zero: Real GDP accelerated to 7.8% YoY vs 6.1% in Q4. NGDP was 8% to almost zero deflator. Zero GDP deflator will be transient and will likely revive as the year progresses led by a positive inflation.
  • Services shine, Agri weakens while Mfg. fail to impress: Agri decelerated (3.5% YoY vs 5.5% in Q4FY23). Within industry, Mfg. showed a marginal pick-up but was still tepid at 4.7% YoY. Construction came in strongly at 8% compared to 10% in Q4, and Services showed broad-based acceleration rising to 10% vs 7% in Q4.
  • Investment mostly govt. led: On demand side, GFCF at 8% YoY followed a solid 9% in Q4FY23. Public finance data show that both state & central govt. have spent big on Capex (well above 50% YoY) in Q1FY24 and considering ~15% Center + State weight in GFCF, analysts of IIFL Capital Services think GFCF growth was almost entirely govt. led. PFCE came in at 6 %YoY, better than previous two Qs of sub 3%. Govt. expenditure (likely mostly revex) was a subdued -0.7% as govt focus stays correctly on capex. Net exports markedly fell and hit GDP growth by ~4.5%. Key charts in analysts of IIFL Capital Services chartbook on the Indian Economy & Markets:
  • Central govt. finances look stretched for now. Fiscal deficit already 1/3rd of budgeted vs 1/5th same time last year. Tax collections (mainly direct taxes) show weakness while govt. has frontloaded its capex and devolution to states.
  • RBI HH & Business surveys as well as CMIE consumer sentiments survey continue to show improvement in sentiments. However, various HF data such vehicle sales, freight traffic, port traffic, card transactions, fuel consumption, foreign trade etc. indicate some slowdown.
  • Employment indicators also indicate some weakness. Naukri Job index has been declining since past few months. MNREGA job demand remains pretty elevated, higher than pre-Covid as well as last year.
  • Credit growth continue to be strong though led by strong growth in services & personal loans segment. SME credit growth has slowed down a bit but still strong. Industrial credit growth continue to lag overall services growth but have shown some uptick recently.
  • Overall Kharif sowing is in line with last year, but sown area for pulses is lagging (-8%YoY). South-west monsoon is currently running almost 10% below normal and current reservoir level though near long term average level is still below previous year
  • CY23 has seen already seen FII inflows so far of about $17bn; CY22 saw outflows of same amount. SIP flows continue to remain strong, touching $1.9bn in July
  • So far in CY23, small and midcaps have significantly outperformed large caps, while Cap Goods and Realty have outperformed all other sectors. Valuations continue to remain near ~1SD above average for large and midcap indices, while small cap is more than 1SD
  • Consensus estimates for earnings project a strong 27% PAT growth in FY24 for the BSE200 companies. FY24 and FY25 EPS estimates for Nifty Index have so far remained broadly stable

Related Tags

  • GDP
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