How Friday’s GDP Results will impact your trading this week
Let’s try a simple experiment.
Did you know that on Friday, the third quarter GDP figures were released?
Out of the following three choices, which one do you fit into?
- You did not know about this news, and you don’t really care to know more.
- You did not really know about the news, but are now intrigued to know more.
- You know about the news, and believe that the GDP figure is negative for the markets.
It turns out that Friday’s GDP announcement is actually very important. And yet, if you open up major news publications, it probably did not make front page news.
Friday’s news showed that our GDP grew by 5.3% during July through September, the first full quarter under our Modi lead government. This also happens to be a 0.4% fall from the previous quarter, where the GDP grew at 5.7%.
5.3% versus 5.7%- that is negative news, right? Negative news leads to a market fall, right?
That is what the major publications will tell you. And they are dead wrong!
How the GDP figure actually affects your trading this week
While it is true that the GDP figure released on Friday was lower than the previous quarter, the market was expecting a reading of anywhere between 4.9% to 5.1%. Hundreds of analysts polled across the country predicated a GDP reading of around 5%.
And so, when a GDP figure comes out better than expected, markets go up. But there is a good chance that newspapers will not write that today, because it does not make for a good front page story.
So while analysts will argue that the 5.3% GDP reading is negative news, it is actually great news for you. This is due to two reasons:
- The markets will, at some point, factor in the fact that the GDP result came in better than analyst expectations.
- This still puts immense pressure on the RBI to cut rates.
Tread carefully today, since the RBI is coming out with its interest rate decision on Tuesday, 2nd December at 11:00am. That being said, the GDP announcement is not negative news.
It’s still a bull rally 🙂