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Nifty 50 Reaction to Indian GDP Forecast by IMF 25.04.2022

In this weekly review, we will analyze the IMF’s forecast for India’s GDP growth rate and its impact on the Nifty 50 and the country’s steel industry.

Contents

Interact with the dashed blue word and green spot on images to get additional details and explanations.

Indian GDP Growth Rate is Expected to Slow

Growing GDP will likely have a negative impact on the Nifty 50. IMF projects India's GDP growth rate to reach 8.2% in 2023. That projection is 0.8 percentage points lower than the figure expected in January, as was revealed in the World Economic Outlook for April 2022 published on Tuesday. While the Russia-Ukraine crisis is unfolding, the report presented "notable downgrades to the 2022 forecast in India, reflecting in part weaker domestic demand — as higher oil prices are expected to weigh on private consumption and investment — and a drag from lower net exports".

Global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023, respectively, than projected in January.

IMF GDP Forecast - Olymp Trade - Expert Review - 25.04.2022
Fig. 1. IMF GDP Forecast, India

Nifty 50 has already reacted to this negative outlook and bounced back up. With the new target levels at 17,650-17,800, we believe the index will be mostly going upwards next week.

Nifty 50 Index Chart - Olymp Trade - Expert Review - 25.04.2022
Fig. 2. Nifty 50 Index, India

Impact on the Steel Industry

TATA Steel’s expenses are growing. The steel industry is one of the market sectors that most suffer the repercussions of the Russia-Ukraine crisis. Recently, TATA Steel announced that it would no longer import coke from Russia. “To ensure business continuity, all our steel manufacturing sites in India, the UK, and the Netherlands have sourced alternative supplies of raw materials to end its dependence on Russia,” said TATA Steel Europe. This step will likely increase the cost of raw materials and press on the asset-heavy company’s profitability in the upcoming quarters. With the possibility of a downward movement on this stock’s chart next week, the key support levels are at 1,240-1,250. In case of a deeper downward correction, the price can drop to the range of 1,070-1,100 levels in the coming weeks.

Fig. 3. TATA Steel, India

Risk warning: The content of the article does not constitute investment advice and you are solely responsible for your trading activity and/or trading results.