October PMI Expands To 51.6

The HSBC India manufacturing PMI stands at 51.6 in October against 51.0 in September which was nine month low. The marginal improvement in the reading exhibits an overall improvement in the Indian manufacturing sector. The data also shows that there was accelerated growth of output and new orders across the manufacturing sector.

The HSBC reading shows that the intermediate goods showed the best growth across the sub-categories. During the October month, the industry witnessed a good amount of growth in demand coupled with higher production figures for the twelfth successive month. The pace of output growth accelerated from the previous month and was solid overall. Going by sub-sector, the intermediate goods showed sharpest expansion during the month.

Interestingly, new businesses showed for the straight twelfth month in a row in October with good amount of new contracts and improvement in demand. The Indian manufacturers continue to win foreign orders for straight thirteenth month too. This has translated in good amount of expansion in purchasing activity in October. The stocks of finished goods too showed growth in October after modest depletion in September. Further on positive front, the inflationary pressure on the input costs and output charges remained historically muted in October.

Commenting on the India Manufacturing PMI readings, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said, "Manufacturing activity picked up modestly amid stronger output and new order flows, particularly from overseas clients. However, firms continued to trim purchases and refrained from aggressive inventory accumulation. Price pressures declined with input prices easing further. Meanwhile, the improvement in growth allowed firms to raise margins by increasing output prices slightly. This trend could strengthen with growth, which is why the RBI will remain cautious about relaxing its grip at this juncture."

With the good improvement in the manufacturing sector coupled with reducing inflationary effect, one can expect the reserve bank to cut down the interest rates in near future. The falling crude oil and gold prices too gave some confidence for the rate cut expectations from the reserve bank. Overall, the growth momentum is seeing consistently across the economy despite of the modest rate of growth. The rate cut by RBI will definitely boost the sentiments across the markets and take it to further new highs in coming few months.