Chinese Worry & Bad GDP Number Worsen The Market

The recent market correction is not expected to recover in near future as the various concerns present across the domestic as well as global front are going to persist for a while now. The global equity market continued to take panic mode over weakening in China’s macro economic data that led to a huge sell off in the equity market during the last fortnight. During this period, major global equity markets including US, Germany, Spain and UK corrected almost 8 per cent. While, the Asian major economies, such as China and Japan, corrected more than 16 and 10 per cent during the same period. The Indian equities market too crash nearly 9 per cent. The foreign institutional investors continued to sell Indian equity and sold Indian stocks worth of almost Rs 17000 crore over last couple of weeks. However, the domestic institutional investors continued to keep faith in Indian economy and bought equities worth of Rs 15000 crore during the same period.

Meanwhile, India's gross domestic product (GDP) growth stood at 7 per cent in Q1FY16 while it was 7.5 per cent in Q4FY15. The decline in the GDP in June 2015 quarter was mainly because of sluggish domestic and foreign demand. The GDP growth was 6.7 per cent in Q1FY15. The government has set a target of 8.1 to 8.5 per cent growth in GDP for FY16. As the global equity market sentiments worsen, the various global research agencies started revising their estimates for the Indian GPD growth. Most of the research agencies had downgraded the domestic economy and lower their estimate by almost 50 basis points for current financial year. The revision in GDP growth estimates was predominantly due to poor weather affecting agricultural output and rural consumption in near term.
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On domestic front, with the government is taking every step to boost the country’s infrastructure, the Road and Highways Minister Nitin Gadkari reiterated that the government is committed to adding about 50000 kilometer of the National Highways by December 2015 to take its length to 1.5 kilometer to transform the face of India’s infrastructure. The Minister of Urban Development Venkaiah Naidu announced the list of ninety eight smart cities that the government has shortlisted. The government plans to spend over Rs 3 lakh crore over the next 5 to 6 years to recast urban cities. Interestingly, as a part of one analysis, nearly 38 per cent or 365 of the 970 odd investment projects announced during 2014-15 are already in implementation mode. In all, projects worth Rs 6.5 lakh crore have begun seeing ground level activity in this period.

According to International Monetary Fund (IMF), the Asian economies apart from Chinese economy are doing pretty well despite of volatility created by China’s slowdown and western financial markets. China’s stressed economy and devaluation of the currency has created turmoil across the global equity markets. Slower growth in major economies such as China and Eurozone, lower commodity prices and the expectations of higher interest rates in the United States would continue to weigh on emerging markets across the region.