Notes on Indian equities, sectors and economy

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FY08 could be better for Indian GDP

Posted by fairval on February 8, 2007

The Indian economy will register a growth rate of 9.2% im FY07, according to the advance estimates for 2006-07 released by the Central Statistical Organisation (CSO) on Wednesday (see story).

In FY08, the economy could accelerate further. The increase should be driven by two sectors – manufacturing and construction.

Manufacturing grew 11% in FY07, and can grow at 14% or so in FY08. We had written 2 years ago, that manufacturing will surpass 10% in this growth cycle, and this has happened.

Construction is on a massive binge. With funds flow not a problem, big builders are all looking at increasing supply at a rate of 100% per annum. The overall market will not grow at this rate, but clearly, building activity will accelerate.

In services, retail will be an area which will accelerate strongly.

Overall, i think Indian economy is still accelerating. A 9.5% to 10% in FY08 looks highly likely, as per the rough numbers given above. This may sustain capital flows into equity markets as well.


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