Business confidence eased in October after hitting a record high in September, although it was still 16.6% above the level seen a year ago and expectations about the overall business environment in the next three months remained elevated.
The MNI India Business Indicator, calculated from the responses of BSE listed companies, declined by 1.5 points to 69.7 in October from 71.2 in September. While confidence among manufacturing companies eased a little, sentiment was supported by service sector companies as the festival season encouraged higher spending in areas including real estate, entertainment, retail and investment.
The modest fall in overall business confidence masked increases in some of the key indicators in October. Notably, the Production Indicator rose for the third consecutive month to the highest in over a year, while New Orders and Order Backlogs were boosted by the heightened demand of the festival season. Consequently, businesses planned to raise their stock levels over the next three months to satisfy the expected turnaround in sales as the general outlook for the economy improves.
Concerns surrounding the weakness of the global economic recovery led to a weakening in several emerging market currencies this month. The Indian rupee witnessed only a marginal fall, although significant enough to make foreign denominated loans more expensive for companies. The exchange rate movement was captured by the Effect of the Rupee Exchange Rate Indicator, which fell by almost 8% to a level below 50, signifying that the rupee was hurting business operations.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “In spite of the latest fall in sentiment, confidence remains elevated and this month saw a continued rise in both output and orders, with firms seemingly benefiting from robust festival demand.”
“The latest survey showed that inflationary pressures continued to ease and the fall in oil prices likely means this trend will continue. With a tough inflation target for 2016, the RBI will likely remain on a tightening bias for now, although continued falls in price pressures should allow the central bank to take their foot off the brake in the first half of next year.”
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MNI India Business Sentiment Eases In October - Domestic Demand Picks Up During Festival Season
Date 22/10/2014