Dead Cat Bounce?

The latest Business Today Business Confidence Index (BCI) shows slight improvement in overall sentiment despite the pessimism around economic and business issues

- Manu Kaushik

As India is going through the second wave of Covid-19 infections, so are fears of uncertainty and gloom. But the consistent improvement in gross domestic product (GDP) numbers over the past year is playing a key role in shaping up sentiments of corporate India, as highlighted in the latest Business Confidence Index (BCI) survey.

On a scale of 100, BCI jumped to 45.5 in the January-March period compared to 43.8 in the previous quarter and 48.2 in the quarter before that. Market research agency C fore quizzed 500 CEOs and chief financial officers across 12 cities for the survey.

Sujan Hajra, Chief Economist at Anand Rathi Securities, says the biggest reason for the boost in sentiment is GDP growth. “The economy has done well quarter after quarter,” he says. GDP declined sharply by 23.9 per cent in April-June 2020. In the next quarter, the contraction was lower, at 7.5 per cent. This was followed by 0.4 per cent growth in the third quarter. Estimates peg fourth-quarter growth at 2-3 per cent.

The optimism, say experts, is also driven by the fact that most large institutions have given lofty growth projections for FY22. “Institutions like IMF, HSBC and RBI have pegged GDP growth for FY22 at 10.5-12.5 per cent. It’s safe to assume that they have taken into account the possible risk factors into their projections,” says Sanjay Kumar, partner at Deloitte India.