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Prospect of growth recovery stokes optimism | BNP Paribas Mutual Fund

Prospect of growth recovery stokes optimism

Stock markets in India traded the week with positive undertones as the RBI gave a shot in the arm to the prevailing market sentiment. The central bank has estimated GDP to grow at a rate of 6% for 2020-21 while projecting a 6.2% growth rate for Q3 December 2020. However, the RBI continues to be concerned about inflation and has revised the CPI inflation projection for Q4 March 2020 to 6.5%, to 5.4-5% in the first six months of 2020-21 and 3.2% in the third quarter of 2020-21. Despite trading on a strong note, profit booking emerged towards the end of the week as investors chose to take some money off the table before the weekend.

Macro-economic Developments

India's manufacturing activity expanded at its quickest pace in nearly eight years in January 2020 on the back of a sharp rise in new business and production. The IHS (Information Handling Services) Markit India Manufacturing Purchasing Managers' Index jumped to 55.3 in January 2020 from 52.7 in December 2019, making it the highest on record since February 2012. Complementing this growth, the IHS Markit India Services PMI also showed that the business activity index grew to 55.5 in January 2020 from 53.3 in the previous month, signalling the strongest upturn in output in seven years. The upswing stemmed from favourable market conditions and better underlying demand, as per the survey. The steepest increase in this figure came from the consumer services sector.

The six-member monetary policy committee (MPC) on Thursday decided to keep its short-term lending rate ie. the repo rate, unchanged at 5.15 per cent in its sixth bi-monthly policy review of the ongoing financial year The RBI maintained its accommodative stance to support growth and said there is policy space available for future actions. The central bank focused on growth and showed a willingness to resort to unconventional steps to cap any up move in yields.

Global Developments

Overseas, most Asian stocks traded under pressure as the growing impact and economic damage from a new virus spreading from China curbed further gains. However, the US continued on its relentless ascent after the market got another shot of confidence from promised trade tariff reductions. Beginning 14 February China would cut in half tariffs on some USD 75 billion of US imports, as part of its phase-one trade resolution with the U.S., according to reports from China's Ministry of Finance.

Institutional Activity

Foreign portfolio investor (FPI) activity remained biased to the negative side through the week. For the period 1st February 2020 to 6th February 2020, FPIs net sold Indian equities worth INR 2345 crore. In the same time period, domestic institutional investors (DIIs) net bought Indian equities worth INR 2492 crore.


Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMIPL) makes no representation that it is accurate or complete. BNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, Asset Management Company, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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