India’s GDP numbers: Power demand growth a silver lining

India’s GDP growth slowed 40bps q-o-q to 4.7% in Q3FY20 but hopes of sundry green shoots abound and there may well be a few if the surge in power demand since late Jan is any guide. Yet, with most other indicators still weak, even before COVID-19, it may still be a hard slog keeping the earnings outlook challenging. With valuations also rich, we stay defensive, therefore, with a bias for large-caps and Financials.

Power: There is much hope that this marks the bottom, though, with frequent assertions of green shoots even if some proved premature. But, there may be some. Power demand has risen by 7% in the last five weeks, e.g., after falling for 5M with growth in Feb at a 8M-high of 6.5%, hurt a tad by a taper in the last week. Inventory rebuild may well explain it rather than a durable rebound but it is still encouraging and should reflect in a better IIP print than in December when it surprisingly contracted by 0.3%.