Credit Suisse see signs of strong economic revival

Uptick in demand across sectors, including auto, oil and cement, are positive signals

Several economic data points are pointing to a strong revival in the domestic economy, say equity strategists at Credit Suisse.

“We continue to believe that official/conventional indicators in India will be slow to reflect underlying economic changes. We, therefore, track several broad-based high-frequency indicators. Most, if not all of these, are now pointing to a strong revival in the economy,” said Neelkanth Mishra, India equity strategist, Credit Suisse. An uptick in demand across sectors, including automobile, oil, and cement, is a positive signal and the trajectory indicates a revival in the economic picture, the Credit Suisse note said.

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For instance, oil volume growth in the past three months is one of the highest in a decade. Also, auto volumes saw a strong pick-up in March, after some softness in January and February.

Also indicating a revival was growth in the cement and power sectors in January and February, the report said. Currency-in-circulation growth also indicates economic revival, it added.

Credit Suisse says growth figures currently are a little amplified due to a low base effect and should normalise September onwards. “…The drivers of this economic revival (state government action, cellphone penetration growth, electrification, central government spends on roads and railways) should sustain,” the report said.

Another major indicator making a case for economic revival is the foreign direct Investment activity.

“FDI, which was reported at an all-time high in the December quarter, directly affects investments on the ground,” said the note.

The Indian market has rallied more than 10 per cent in the past one month. Revival in the economy is consolidating the gains, say analysts.