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Why India’s Services PMI Fell in February

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India’s services PMI in February 2018

According to data provided by Markit Economics, the final Markit services PMI (purchasing managers’ index) for India fell in February 2018 and entered the contraction zone. This metric stood at 47.8 in February as compared to 51.7 in January 2018 and came in below the preliminary market estimate of 51.

India’s services PMI in February 2018 was affected by the following factors:

  • Production volume and output contracted for the first time in February in the past three months.
  • New business orders and export orders also declined in February 2018.
  • However, employment in the service sector rose in February 2018.
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Market impact

The weaker improvement in both India’s manufacturing and services activity suggest that both domestic demand and overseas demand weakened in February 2018. There are huge uncertainties in the present investment environment of India and investors are worried about the instability in its political environment ahead of the next general election in 2019.

In the previous part of this series, we saw that major ETFs that track the performance of India (INDA) fell significantly in February 2018. The overall selling pressure in the global equity market dragged down India’s equity market in February. The iShares MSCI India Small-Cap ETF (SMIN) and the VanEck Vectors India Small-Cap ETF (SCIF), which track India’s small-cap stocks, fell 6.4% and 6.3%, respectively, during the month.

In the next part of this series, we’ll analyze Mexico’s manufacturing PMI in February 2018.

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