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ICICI Securities Report
In our earlier note, we had argued that lagged gross domestic product data has no correlation with stock returns although stock returns are relatively better predictors of GDP numbers.
During March 2020, while the quantum of fall in economic activity due to the pandemic was still being debated, equities gave their verdict immediately by falling 38% from the peak level during the start of the year, which in hindsight appears an overstretched reaction on the downside.
Lagged GDP data for Q1 FY21 was released on August 31 and validated the market verdict by showing a contraction of 24%.
The sharp decline in Q1 FY21 GDP grabbed headlines, but by then Nifty50 had already bounced back approximately 50% to 11,700.
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