HSBC Services PMI For Sept 2013 Disappoints

The last two days have seen good positive news flows for the Indian equity markets. However, the Services PMI report seems to have brought a halt to that spell. The HSBC Services Purchasing Managers' Index (PMI) compiled by Markit slipped from 47.6 in August to 44.6 in September. This marked its straight third reading below 50, the threshold between growth and contraction, and is the weakest since April 2009.

The PMI numbers rounded off the worst quarter for the Indian services sector - which accounts for nearly 60% of the economy - in more than four years, stoking fears that growth in the three months to September will be weaker than April through June. The figures also indicate that firms were less optimistic about the future and were cutting down on their staff numbers as new business dried up. This clearly suggests that the Indian markets are not completely out of the doldrums yet.

We, at DSIJ, have been reiterating that the September quarter results will be no better than those in the June 2013 quarter. However, one point to remember here is that the INR has depreciated over the quarter, and hence exporters may witness beter performance on the financial front for the period.

The HSBC Markit Manufacturing survey released earlier in the week on Tuesday, October 1 showed factory activity shrinking for the second consecutive month in September.

The poor Services PMI numbers have already been discounted on an intraday basis, and the indices have witnessed a marginal decline. We do not expect any further impact of this update going ahead.