The global brokerage Nomura on Friday released a report on its Asia outlook for 2018. Citing a positive note on India, the brokerage house said the consumption story of the country is back on track. Nomura is bullish on Indian equities with Nifty December 2018 target of 11,880. “Business is on the cusp of an upcycle which will drive strong earnings growth as the corporate earnings-to-GDP ratio is at its lows, with a significant contraction in margins and return on equity,” Nomura said. The global brokerage is overweight on financials, automobiles, capital goods, construction and pharmaceuticals in its research report. The list of underweights constitutes cement, IT and consumer staples. Nomura sees the derailment of current government policies as a key risk to the positive outlook on India.
Last week, Nomura had predicted that India will record 7.5 percent growth rate in 2018. “GDP growth accelerated to 6.3 percent year-on-year in Q2 from 5.7 percent Q1, suggesting the economy bottomed out in Q1 and a recovery is underway as the drag from the twin disruptions gradually fades. The recovery was led by the industrial sector. October’s high-frequency data are weak, but we expect the easing GST compliance burden, ongoing remonetisation, bank recapitalisation, and a supportive global environment to support a growth recovery ahead. Expect GDP growth to pick up to 6.9 percent year-on-year in Q3 and average 7.5 percent in 2018. Expect a hawkish hold from RBI next week”, told Sonal Varma, MD and Chief Economist, Nomura to CNBC-TV 18.
India’s GDP growth sharply rebound to 6.3 percent in fiscal second quarter July-September from a three-year low in the first quarter, as businesses sprung into economic activity ahead of a condensed festive season and accelerated production to build inventory after the implementation of GST. India’s GDP growth in the second quarter (Jul-Sep) accelerated to 6.3 percent from 5.7 percent in Apr-Jun and 6.1 percent in Jan-Mar, Central Statistics Office data showed on Thursday. However, the pace of growth in Jul-Sep was still way below 7.3 percent recorded in the corresponding quarter a year ago.