India grew at faster pace in FY23; what does it mean for Dalal Street investors?

The Indian economy grew at a pace faster than expected in the fiscal year-ended March, thereby cementing its position among the fastest-growing economies in the world.

The economy grew 7.2% in 2022-23 (April-March), which is higher than the government’s

earlier estimate of 7.0%, and this has been primarily led by the services sector.

Given the way India has weathered the global economic shocks and continued on its growth path, the prospects for the domestic economy remains bright, according to most experts.

“While RBI expects growth to moderate to 6.5% YoY in FY24 owing to global factors, still, India will remain amongst the fastest growing major economy in the world and may surprise on the upside,” says Mohit Ralhan, chief executive officer, TIW Capital.

Continued investments and net exports played a key role on the demand side of GDP, according to some experts.

Interesting to note is that the growth has come in spite of higher interest rates and weaker real income growth.

Growth in investments is crucial for sustenance of long-term economic growth. The real estate sector has remained strong despite multiple headwinds such as aggressive interest rate hikes and consumer inflation.

“Going forward, government initiatives such as high allocation to infrastructure spending, and policies to promote domestic manufacturing such as PLIs should be supportive of India’s long term economic growth,” says Vivek Rathi, Director Research, Knight Frank India.

Some economists also pointed out the pick up in private investment activity which is a positive sign and it boosts prospects for domestic growth.

Dalal Street investors are set to rejoice the numbers as it will have a positive impact on domestic-oriented sectors.

“The strong growth in the manufacturing sector only reinforces the trend seen in Q4 quarterly results where many mid-sized companies in sectors like engineering, auto ancilliary, building materials, etc have shown a strong volume offtake,” said Gaurav Dua, capital market strategy, Sharekhan by BNP Paribas.

What should investors do?

Even as near term risks such as El Nino and a likely recession in the US and Europe persist, money managers have held their bullish stance on India and recommend investors to allocate funds into domestic growth-oriented sectors.

“We see domestic-focused sectors to perform relatively better than those having global exposure. Banks, industrials, and consumption driven companies should deliver strong earnings performance,” says Vinay Jain, portfolio manager at Karma Capital.

Nishit Master of Axis Securities PMS is of the view that as long as the underlying growth and earnings momentum remain strong for Indian corporates, any corrections in stocks will be bought by investors.

“We are very constructive on the markets for the next year or two,” Master said.

Gaurav Dua also remains constructive on equity markets as he sees the beginning of a multi-year upcycle in the Indian economy ahead.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)