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India’s FY14 GDP growth, excluding agriculture, expected to moderate to 4.9%

According to Nomura, excluding agriculture, India’s GDP growth is expected to moderate to 4.9% in FY14 from 5.0% in FY13 due to continued slack in mining output, contraction in manufacturing output growth and subdued activity in the construction and trade, hotel, transport and communication sectors

 

India’s gross domestic product (GDP) growth, excluding agriculture, is expected to moderate to 4.9% in FY14 from 5.0% in FY13, suggesting weaker underlying demand momentum, says Nomura.

 

In a research report, Nomura said, “This moderation will be due to continued slack in mining output, contraction in manufacturing output growth and subdued activity in the construction and trade, hotel, transport & communication sectors. The only silver lining is the pickup in financial services growth (11.2% y-o-y), but this appears to be largely one-off (reflecting stronger deposit growth due to NRI inflows under the forex swap window).”

 

Nomura estimates India’s real GDP growth at 4.9% in FY14 (year ending March 2014), better than 4.5% in FY13. Much of the rise is due to stronger agriculture growth, says Nomura in a research note on GDP growth, it said.

 

According to Nomura, domestic demand - both investment and private consumption – are likely to moderate further while net exports are expected to improve and contribute more than 50% to overall GDP growth in FY14.

 

For two years in running now, the economy will have expanded at less than 5%, estimates Nomura; the question is whether FY15 will see a breakout. Nomura analysts do not see a breakout; rather they expect a prolonged period of consolidation continuing for most of 2014.

 

External demand is relatively better, but with both monetary and fiscal policy tightening, Nomura expects GDP growth to remain around 5% y-o-y in FY15. A stable government post elections can, overtime, revive the investment cycle if reforms are reinvigorated.

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Equity mutual funds report a net inflow of Rs427 crore in January

Equity mutual funds register another month of positive inflows on the back of improved sales, new fund offers and lower redemptions

Equity mutual funds have registered net inflows for three consecutive months, totalling Rs1,983 crore. This has been the highest inflows in three consecutive months since October 2011, when equity funds reported a total inflow of Rs3,636 crore. In January last year, equity mutual funds registered a net outflow of Rs2,690 crore. At Rs4,558 crore, sales of equity schemes in January 2014 was higher than nine of the past 12 months. Sales of equity linked savings schemes (ELSSs), which usually picks up towards the end of the financial year, increased by nearly 50% to Rs307 crore in January from Rs207 crore reported in the month of December 2013. As many as four close-ended funds were launched, bringing in a total of Rs472 core in January. Redemptions in January, which amounted to Rs4,131 crore, was the lowest in the past five months.
 

Over the past three months as many as 12 new fund offers (NFOs) have been launched bringing in a total of Rs2,192 crore. The four NFOs that were launched in January were all close ended equity funds. These NFOs included IDFC Equity Opportunity Series 2, Reliance Closed Ended Equity Fund - Series B, Sundaram Select Micro Cap Series I and Series II. It seems fund houses are still cashing in on the uptrend in the market. In an earlier article we mentioned how investors and mutual fund houses rush in when the market is rising. (Read: Equity mutual funds register highest sales in November as market hovers near all-time high)
 

While equity mutual funds reported net inflows, the total number of equity folios declined marginally to 29.67 million folios in January 2014 from 29.89 million folios in December 2013. Over the year, the total number of equity folios has declined by 3.96 million or nearly 12%, from 33.63 million in January 2013.
 

Over the one year period while the Sensex has moved up by 3.11% to 20,513 as on 31 January 2014 from 19,894, the total equity assets under management has declined by as much as 7% to Rs1.75 lakh crore in January 2014 from Rs1.90 lakh crore in January 2013. This is due to the fact of heavy outflows over the year which amounted to a total of Rs7,310 crore.

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