The GDP data released for 4QFY17 indicates the impact of the demonetization on the economy, primarily on construction, real estate and financial services. However this impact is not expected to spill over in FY18E. We believe that GST is likely to show positive results from 2HFY17 and market in this anticipation is seeing strong rally. We continue to maintain a positive view on economy and markets.
India’s 4QFY17 GDP grew by 6.1% vs. consensus of 7.1%. The full year GDP for FY17 grew by 7.1% while that in 3QFY17 grew by 7%. The FY16 GDP growth estimate was revised upwards to 8%. The 4QFY17 gross valued added (GVA) was at 5.6%, vs. 3QFY17 GVA of 6.7% and 4QFY16 GVA of 8.7%. Slowdown in the construction, real estate and financial services affected the 4Q numbers.
We however see a rebound in the auto sales as a healthy indicator of recovery in the economy and consumption sector. Also considering a bumper crop production, we continue to believe that economy is expected to do well in FY18E. A temporary disruption in terms of GST implementation remains en route, however 2HFY18E should support full year GDP numbers on the back of lower base and clarity over the GST to the corporate.
