Market has expressed positive sentiment after the RBI’s March interest rate cut and was led by increased confidence among manufacturing and construction companies. The MNI India Business Sentiment Indicator, a gauge of current business conditions among large Indian companies, rose by 1.4% to 63.9 in April, from an 11-month low of 63.0 in March.
Aside from overall business sentiment, key activity metrics including Production, New Orders and Productive Capacity all pointed to an improvement at the start of India’s financial new year.
The Production Indicator rose for the first time in five months to 62.6 in April, slightly above the outturn of 62.0 in the same month a year earlier. New Orders, a key signal of business demand rose to 61.4 in April from 59.2 in March, the highest since November 2014. On the downside, Export Orders remained relatively weaker, held back by the stronger rupee.
The recent central bank rate cuts have started to come through with businesses reporting both a lower cost and greater availability of credit. The Interest Rates Paid Indicator fell to 43.6 in April, the lowest on record while credit availability picked up to the highest since January. Firms were the most optimistic about the financial position since December 2014.
The long trend decline in inflationary pressures appears to have come to an end. Input Prices increased for the second consecutive month and firms reported an increase in the prices they charged to the highest since November.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, “There was a welcome improvement in business sentiment in April, accompanied by a pick-up in output and orders. This may mark a turning point following the downturn since the end of last year, as companies take advantage of the easier credit conditions.”
“While there probably remains a little further room for the RBI to cut interest rates, a pick-up in inflationary pressures, following a sustained downturn, suggests that most of the good news on inflation is now behind us.”