Monday, November 30, 2009

[Investors] Indian economy displays healthy growth in second quarter, GDP grows @ 7.9% in Q2FY2010

Economy: Indian economy displays healthy growth in second quarter

  • India?s gross domestic product (GDP) growth for Q2FY2010 came in at 7.9% year on year (yoy), well above the consensus estimate of 6.3% as well as the GDP growth of 6.1% yoy for the previous quarter. The sturdy growth seen in Q2FY2010 was fuelled by a strong growth momentum in the community, mining and manufacturing segments, which grew by 12.7%, 9.5% and 9.2% yoy respectively. The surge in the GDP growth rate followed by a steady rise in inflation will reiterate the government?s stance of phasing out the stimulus measures announced earlier.
  • India?s trade deficit in September 2009 came in at $7.8 billion, declining both on a year-on-year (y-o-y) as well as a sequential basis. On a y-o-y basis, the trade deficit fell by a sharp 49.4% whereas the sequential decline stood at 7.2%. Notably, the exports for the month contracted at a much slower pace, as the same dipped by 13.8% yoy, lower compared with the 19.4% decline seen in the previous month. Meanwhile, the imports contracted at a faster pace than exports registering a decline of 31.3%.
  • The Index of Industrial Production (IIP) for September 2009 registered a stellar growth of 9.1% yoy, far outperforming the estimate of 7% yoy. On a sequential basis, however, the IIP witnessed a decline from the 11% y-o-y growth seen in the previous month. This was on account of a dip in the core sector?s growth. The core sector?s growth accounts for ~27% of the IIP. From a use-based perspective, the growth in the capital goods segment continued its upward trend, registering a stellar growth of 12.8% vs the 8.7% rise seen during August 2009. The growth in consumer goods stood strong at 8.2% vs the 7.4% growth seen during the previous year, led by a stellar 22.2% y-o-y growth in the consumer durables segment, which made up for the muted growth of 2.6% seen in the consumer non-durables segment.
  • During the month, the government switched to using monthly inflation data for all commodities from the earlier system of reporting weekly price movements. For the month of October, inflation continued its upward march with the Wholesale Price Index (WPI), registering a growth of 1.34% from the year-ago period. Importantly, the pace of annual price increase more than doubled on a sequential basis from the 0.5% y-o-y increase seen in the month of September. 
  • Globally, the macro economic data continues to point towards signs of economic recovery, pushing central banks to ponder over the withdrawal of various stimulus measures announced earlier. Meanwhile, the emerging economies too are showing signs of recovery as indicated by the trend in their leading indicators. However, events such as the deferral in the repayment of debt by Dubai World have caused concerns relating to the global financial crisis to resurge.

Banking: Credit offtake fails to pick up

  • Against the backdrop of the high base effect of the last year (a 27.4% y-o-y growth during the year-ago period) and a lower credit offtake the credit (non-food) growth continued its downward trend and declined further to 10.3% yoy. Furthermore, the deposit growth too slipped marginally to 18.6% from 18.9% in the previous month. 
  • The credit-deposit (CD) ratio remained more or less stable at 68.4% (as on November 6, 2009), in line with that of the previous month. Meanwhile, the incremental CD ratio dipped marginally to 41% from 41.4% in the last month. 
  • The money supply (M3) growth as on November 6, 2009 moderated further to 17.8% as compared with 19.7% in the previous month.
  • The yields on the government securities (G-Secs; ten-year) stood at 7.17% as on November 26, 2009, down by 25 basis points from the previous month?s levels. The G-Sec yields for all maturities fell on a month-on-month (m-o-m) basis with five-year, three-year and two-year yields, falling by over ~40 basis points each, while one-year G-Sec yields declined by 14.5 basis points. 

Equity markets: Industry AUMs display healthy growth

  • During the month-till-date (MTD) period (November 01-26, 2009), the average daily volume expanded in the futures and options (F&O) segment but contracted in the cash segment. 
  • The growth momentum in the industry assets under management (AUMs) continued during October 2009, as the industry AUMs grew by a strong 76.7% yoy to Rs763,162 crore, significantly higher than the 40.6% y-o-y growth seen in the previous month. Importantly, on an m-o-m basis, the industry AUMs registered a growth of 2.6%.

Insurance: Industry growth back in the green

  • The annualised premium earnings (APE) for the life insurance industry increased by a healthy 35.7% yoy during October 2009 compared with a 6.1% decline registered in the previous month. The growth primarily stemmed from a 45% y-o-y increase in the APE for Life Insurance Corporation of India (LIC) while the private players also witnessed a healthy 29.6% y-o-y growth in their APE.
  • In October 2009, the gross premium underwritten for the general insurance industry grew by 16% yoy, higher than the 10.4% growth seen in the previous month. The public sector players posted a healthy growth of 13.4%, while the private sector players registered a growth of 19.8% yoy, higher than the growth seen for the public sector players during the month.

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