Today, the Central Statistical Organisation gave out the GDP numbers and said that the growth would be 5% for this fiscal year. For stock markets, this may be a great come down, for the Indian industry also these numbers may project a dismal picture, but for the investors, it is not such a great cause for concern. Yes, it is a come down from the earlier projections of 5.6 to 5.8%. It basically implies that in the third and fourth quarters of the fiscal year, the growth will be less than 5%. That’s how you make an average of 5% for the year. It is a bit worrisome but be rest assured Governments usually play hooky with the GDP numbers to suit their own political agenda too. The Indian government, is especially famous for issuing out optimistic projections, when the growth in GDP is far from satisfactory. Some other agency will come out and disprove the CSO numbers and say that they calculated it incorrectly. And nobody has the inputs to calculate the GDP, except for the government, especially for every quarter.
All the projections of India being a powerful nation by 2020 or 2030, are extrapolated on the Goldman Sachs, report on BRIC economies which had projected that India’s GDP would be close to $38 trillion by 2050, but there is a caveat attached to these numbers. They assume that India will take care of its own problems and infrastructure issues. The projections assume an average growth rate of 7 to 8% for the next 20 to 25 years non- stop. Bt a rate of 5%, all these projections remain just projections and the India story may not pan out as people assume.
A lower growth rate effects the government spending, as a result, capital goods, infrastructure metals segment and heavy engineering stocks usually take a hit. But this also gives the intelligent investor an opportunity to buy good quality stocks from these industries at throwaway prices. Discerning investors should look out for a buying opportunity in stocks like Crompton Greaves, BHEL and Larsen and Toubro when the markets react and the stock prices of these businesses fall further from current levels.
TailPiece: A word about Noida Toll Bridge Co Ltd. I have been getting a lot of queries about this stock. This stock has not performed as well as the general market has performed in the last one year or so. Some of you must be feeling disheartened and fed up. I do not find anything wrong with the stock except for a political risk in that the government on its own or under pressure from various quarters which includes the bureaucracy, the mango man, business rivals may renege on the agreement or reduce the time period of the revenue agreement. Apart from that, the only risk which I foresee for this company is an earthquake which can damage and destroy, the entire toll bridge . I am yet to check the annual report whether the bridge has been insured or not. In case it is insured than that risk is also mitigated Otherwise, from 2015 onwards. This company should become a completely debt free company. Therefore, please take your own call at this juncture on the future of this stock. The only thing which I assured in my assessment and coverage of my stocks on this blog is very little downside risk. The trick will happen when the mob identifies the stock and wants to ride the bandwagon The brave hearts and the patient investors could stay invested.