Dear Sir, Last week we have discussed on “6 Biggest Risk factors for India…” In this issue, we would be discussing on “Does Economic Growth Translate Into Equity Returns ?” "Knowledge Plus for Wealth + " will give you the overview of the recent happenings in the financial market. Kindly share your valuable feedback at info@valueplusinv.com to help us serve you better. Thanks

1. KNOWLEDGE PLUS
For Wealth …..
VALUE PLUS- The Family Office
From
Research Desk

2. Last week at the Financial Markets!!!
• SENSEX rose by 506.98 (2.59%) points and closed at 20082.62 end of the
week.
• (FIIs) were net buyers in equity segment leading to net inflow of Rs.
4125.40 Crore
News Impact
• April HSBC Service PMI data stood at 50.7. • Service sector contributes 60% in GDP,
Government may increase speed on
reforms.
• Index of industrial production (IIP) grew by
2.5% for the month of March 2013.
• Though at a two decade low, it shows
signs of recovery in industrial output.
• Increase in the industrial demand in
future.
• Railway and Law Minister put resignation. • It may create hurdle for execution of
reforms.
• Investment flow may affect as India
image will spoil in international.
• Risk will increase in alliance company.

3. Last week at the Financial Markets!!!
Price Performance of Different Asset Class

4. Next Week in the Financial Markets….?
• Q4 results of the following companies will provide the next impact :
• Amara Raja, Aptech, Bank Of Baroda, Nestle India, Rashtriya Chemical fertilizers,
Reliance Power, Dr Reddys Lab, Elder Pharma, United Bank of India, Century Textiles,
J&K Bank, etc.
• Wholesale Price Index data (WPI) will release on May 14, 2013
•

5. Hot Topic of the Week
Does Economic Growth Translate Into
Equity Returns ?

6. Leading Indicators
• An indicator that predicts future events and tend to change
ahead of that event.
• Sometimes they are used as a predictor for economy.
• Some of the examples of leading indicators are:
– Money Supply
– Stock Market
– Auto Sales Numbers
– Cement Dispatch Numbers
– HSBC Manufacturing PMI

7. Lagging Indicators
• An indicator that follows an event.
• Many time it observe that market reaction in opposite
direction after release of data.
• Some of the examples of lagging indicators are:
– GDP data
– Unemployment data
– Inflation data

8. Market Return v/s GDP Growth
June,2008
Oct,2008
Dec, 2008
March,2009
June,2009
Oct,2009
Dec, 2009
March,2010
June,2010
Oct,2010
Dec, 2010
March,2011
June,2011
Oct,2011
Dec, 2011
March,2012
June,2012
Oct,2012
Dec, 2012
March,2013
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
8.5%
5.8%
8.6%
7.3%
9.4%
7.8%
5.3%
5.5%
4.5%
-8%
-52%
33%
81%
17%
-25%
-8%
8%
GDP Growth Market Return
Market
discounts GDP
growth approx
6 month ahead

9. Sensex Returns v/s India’s GDP growth
Source : Ambit Capital
The correlation between Market return and GDP growth is weak , mainly
since the Market ‘anticipates’ GDP growth about 6 months ahead in time.
Weak Correlation
between Market
Return and GDP
Growth
Regression Line

10. Conclusion
• Market ‘anticipates’ GDP growth about 6 months ahead in
time.
• It is no/weak correlation between Market return and GDP
growth.
• Retail investors believes that higher economic growth
translate into higher equity returns but its Myth.
• Stock selection is important for positive returns in equity
market.

11. THANK YOU
Research Desk
@
VALUE PLUS - The Family Office
Office: (0265 -2324600,6629800)
Email: crm@valueplusinv.com
Website: www.valueplusinv.com