Positive PMI Data Sends Wave Of Confidence Through The Markets
DSIJ Intelligence / 03 Dec 2012
There seems to be a slew of positive data flowing in for the Indian economy. The latest piece of data is the HSBC India Manufacturing Purchasing Managers Index (PMI) for Nov 2012. This came in at 53.7% as against 52.9% in the month of Oct 2012, which indicates an improvement in the health of the Indian manufacturing sector. An index reading above 50 indicates an overall increase in manufacturing activity, while one below 50 indicates an overall contraction.
Such a rise is attributed to the new orders as well as export sales, both of which saw an increase. The demand remained robust for the domestic as well as the international markets. Order book volumes expanded at the fastest rate in the last 5 months (i.e. June-Nov 2012), while growth in new export orders was also the sharpest in the same period. This helped the index itself to increase at its fastest pace in last 6 months.
What one should note here is that India's HSBC PMI number is showing signs of bottoming out, and hence, one could see growth moving northwards from here on. From a reading of 55 in June, it touched a low of 52.8 for the month of Sept, and it has been improving from thereon.
In fact, in addition to the Indian data that is improving, China's PMI data also came in as a happy surprise, which hints that there are signs of recovery across Asia, and that the emerging market economies (especially India and China) can help world economic growth get back on the growth track. China’s PMI figure for Nov 2012 came in at 50.5% against that of 49.5% in Oct, signalling the first improvement of operating conditions in the last 13 months.
If we connect the dots, it seems that there is a sense of confidence on D-Street. On Dec 3, 2012, Morgan Stanley revised India’s GDP growth outlook for FY2013 to 5.4% against the earlier estimate of 5.1%. This was due to the better than-expected Sept quarter GDP numbers (which came in at 5.3%) and stabilisation in the non-agriculture growth indicators.
Last week, sovereign credit rating agency Moody's announced retaining its outlook on India as stable at the Baa3 level. Goldman Sachs further upgraded the outlook for India to ‘overweight’ from the earlier ‘neutral’ as it foresees growth recovery going ahead. Fitch’s latest report confirming a slowdown in the economy has affected the market today (Dec 3), but this is expected to be a temporary blip.
All these developments have definitely helped the markets to move northwards, which is evident from the fact that the Sensex is up 25% on a year-to-date basis. It has appreciated roughly around 11% over the last 3 months, since the government started announcing of various measures for reforms.
Another event that is being awaited this week is the Parliamentary discussion (scheduled for Dec 4 and 5) over FDI in multi-brand retail under a rule that entails voting. We, at DSIJ, were among the first to call out that the Indian markets are on a bull run, and we continue to believe the same. We expect further reforms initiatives from the governments end going ahead, which will augur well for the economy and the markets.
Such a rise is attributed to the new orders as well as export sales, both of which saw an increase. The demand remained robust for the domestic as well as the international markets. Order book volumes expanded at the fastest rate in the last 5 months (i.e. June-Nov 2012), while growth in new export orders was also the sharpest in the same period. This helped the index itself to increase at its fastest pace in last 6 months.
What one should note here is that India's HSBC PMI number is showing signs of bottoming out, and hence, one could see growth moving northwards from here on. From a reading of 55 in June, it touched a low of 52.8 for the month of Sept, and it has been improving from thereon.
In fact, in addition to the Indian data that is improving, China's PMI data also came in as a happy surprise, which hints that there are signs of recovery across Asia, and that the emerging market economies (especially India and China) can help world economic growth get back on the growth track. China’s PMI figure for Nov 2012 came in at 50.5% against that of 49.5% in Oct, signalling the first improvement of operating conditions in the last 13 months.
If we connect the dots, it seems that there is a sense of confidence on D-Street. On Dec 3, 2012, Morgan Stanley revised India’s GDP growth outlook for FY2013 to 5.4% against the earlier estimate of 5.1%. This was due to the better than-expected Sept quarter GDP numbers (which came in at 5.3%) and stabilisation in the non-agriculture growth indicators.
Last week, sovereign credit rating agency Moody's announced retaining its outlook on India as stable at the Baa3 level. Goldman Sachs further upgraded the outlook for India to ‘overweight’ from the earlier ‘neutral’ as it foresees growth recovery going ahead. Fitch’s latest report confirming a slowdown in the economy has affected the market today (Dec 3), but this is expected to be a temporary blip.
All these developments have definitely helped the markets to move northwards, which is evident from the fact that the Sensex is up 25% on a year-to-date basis. It has appreciated roughly around 11% over the last 3 months, since the government started announcing of various measures for reforms.
Another event that is being awaited this week is the Parliamentary discussion (scheduled for Dec 4 and 5) over FDI in multi-brand retail under a rule that entails voting. We, at DSIJ, were among the first to call out that the Indian markets are on a bull run, and we continue to believe the same. We expect further reforms initiatives from the governments end going ahead, which will augur well for the economy and the markets.
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