Article

INDIA’S SERVICES PMI CAME IN AT 11 YEARS HIGHS IN JUNE

date July,  2022
time 2 mins read

INDIA’S SERVICES PURCHASING MANAGERS’ INDEX CAME IN AT 11 YEAR HIGH IN JUNE

Financial markets have been revolving around the edge of the global slowdown on fears of massive interest rate hikes by the United State’s central bank followed by boiling inflation and fading economic growth all over the globe. But on the domestic front, India’s numbers are showing some green shoes from the last couple of weeks where the eight core infrastructure growth came robust followed by good auto sales numbers from all segments of automakers. Apart from this, today the services PMI data also surprised the street where the index rose to 59.2 in June 2022 from 58.9 in the month of May 2022.

Let us know what exactly Services PMI means:

To measure the insights of the economy, the Purchasing Managers’ Index (PMI) is a good tool to be used by various market participants. It is based on surveys of the businesses and the most common of them is the Manufacturing PMI & Services PMI.

The IHS Markit India Services PMI is based on the data compiled through questionnaires sent to purchasing executives of around 350 private service sector companies. The index tracks variables such as sales, employment, inventories, and prices. This enables the investors to take better decisions, and understand the growth picture and the demand situation in various industries.

This data also gives initial takeaways from the economy whether it is in a healthy condition or is a slowdown on the ground level situation. It takes the corporate growth trajectory into consideration and how well they are performing at the grass root levels.

In Purchasing Managers’ Index (PMI) method, a number above 50 means expansion while a score below 50 denotes contraction. This means the Indian service sector is in a strong expansion mode in the last few quarters.

What do market participants have to do now?

For the eleventh straight month, the Indian services sector witnessed some serious expansion in output. The reading on the PMI scale is on the northward trajectory clearly signaling the demand growth in the service industry. This also indicates that the next recovery in economic growth will be led by service-related industries followed by the other allied sectors.

As far as long-term investors are concerned, this adds to the optimism in the economy but in the further next couple of months’ data should also be keenly awaiting to see whether the growth is long-lasting or it is just a single-month event. Investors should continue their ongoing investment in the Indian equity markets as we have a bullish view of the Indian equities and expect them to outperform their global peers.

For short-term traders, this is a good market to catch up on some fundamentally good stocks for short-term trading keeping risk appetite in mind and following proper stop loss and targets. Also, one should also have a hedge in these market conditions for the derivative positions where the volatility is likely to expand in the next few weeks. Short-term traders should have a buy-in decline strategy in the current market scenario till the recent swing lows in the index are not breached decisively in the near term.