MARKETS SENSE THE SCENT OF A SLOWDOWN

IT is flowing out in dribs and drabs and is not yet a deluge of dismal news. As high-frequency growth indicators flash amber and red the stock markets seem to sense the scent of a slowdown.

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This week, India's savers were informed that foreign portfolio investors sold stocks worth $8.4 billion just in October, surpassing the levels recorded in March 2020. The exodus and dips in the Nifty50 only partly explained by the lure of China-are fuelled by fears of slowing growth and deceleration in earnings.

The pixels of the picture spell the story. On August 8, the Reserve Bank of India presented a bullish outlook for the economy, projecting GDP growth for the year at 7.2 percent. Governor Shaktikanta Das stated that India's GDP will grow at 7.1 percent in the first quarter, 7.2 per cent in the second, 7.3 per cent in Q3 and 7.2 per cent in Q4. Three weeks later, the Ministry of Statistics informed that India's GDP growth had slowed down to 6.7 per cent in the first quarter.

On October 9, the RBI recorded that growth was slower in Q1 but maintained that GDP growth in Q2 would be 7.2 percent. The forecast could be challenged if the slowdown visible in data on index of industrial production (IIP) persists.

On October 11, MOSPI revealed that IIP contracted in August 2024-it was at (-) 0.1 percent compared to 4.7 percent in July 2024. The granular details are stark-the labour-intensive mining sector contracted by (-) 4.3 percent, electricity by (-) 3.7 percent, while manufacturing grew by just 1 percent. Yes, high-frequency data is frequently volatile. But equally the contraction merits attention landingia in--particularly when bank lending is also slowing.