India IP Jumps as Services PMI Slumps

Market Snapshot

Asset	Level	Change
Nifty 50	23,995.95	+0.96%
Sensex	76,835.78	+1.02%
USD/INR	95.85	+0.08%
EUR/INR	109.17	+0.19%
Reliance	1,267.70	-0.96%
HDFC Bank	735.40	-0.56%
Brent Crude	86.77	-1.80%
Gold	4,024.30	-1.23%
Bitcoin	63,912.28	+0.29%
India Short-term Rate	5.50%	+0.00%
India Long-term Rate	-	-

Prior Economic Events

Data	Prior	Cons	Actual
Industrial Production Year-over-Year	5.10	5.60	7.30
Manufacturing Production Year-over-Year	5.50	-	7.80

Today's Economic Events

Data	Prior	Cons	Time
No events available

Industrial production jumped to 7.3% YoY, well above consensus, while manufacturing output rose 7.8%.
Services PMI fell to a four-year low, signaling softer domestic demand despite resilient headline growth.
Rupee recovered as oil prices dropped on easing US-Iran tensions, with RBI intervention supporting the currency.

Yesterday's Recap

Industrial production rose 7.3% YoY in June, beating the 5.6% consensus and prior 5.1% reading, while manufacturing production climbed 7.8% from 5.5%. Equity markets snapped a five-day losing streak, with Nifty 50 advancing 0.96% to 23,995.95 and Sensex gaining 1.02% to 76,835.78. The rupee strengthened modestly to 95.85 against the dollar amid a 1.8% decline in Brent crude to 86.77.

Services PMI printed at a four-year low, highlighting weaker spending momentum even as headline activity held up. RBI measures and lower oil prices helped the currency post its strongest session in over six weeks. Reliance and HDFC Bank shares declined 0.96% and 0.56% respectively, weighing on broader sentiment.

Gold fell 1.23% to 4,024.30 as risk appetite improved. Net FDI inflows declined amid higher repatriations, while the rupee’s real effective exchange rate normalized from prior overvaluation.

The Day Ahead

No major domestic data releases are scheduled for today or tomorrow, leaving markets to focus on global developments. Traders will monitor US-Iran developments and any further oil price moves that could influence the rupee. Corporate earnings season continues with attention on IT and banking results.

RBI liquidity operations and any fresh FCNR(B) inflow data may also draw scrutiny. Investors await clarity on potential monsoon shortfalls and their impact on rural demand. Broader equity sentiment will hinge on Fed signals and global risk appetite.

Asia’s thermal coal imports rebounded except in India, reflecting softer power demand and a shift toward renewables.

Other Economic Notes

Net FDI inflows have declined amid higher repatriations and inflation-control measures, reducing external financing buffers. Asia’s thermal coal imports rebounded except in India, reflecting softer power demand and a shift toward renewables. The rupee’s real effective exchange rate has normalized from prior overvaluation, potentially supporting export competitiveness.

Services sector weakness raises questions about whether consumption is shifting toward experiences rather than goods. <i>↓ p.2</i>

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Other Economic Notes (continued)

These trends point to a growth profile that remains above peers but faces uneven domestic demand. New US tariffs on India create a relative advantage versus some competitors in textiles, though exclusions remain limited.

Global Macro News

Easing US-Iran tensions triggered a sharp drop in oil prices, directly benefiting India’s current account and inflation outlook. The pause in hostilities allowed the rupee to strengthen further, with RBI intervention amplifying the effect. Asian coal demand continued rising except in India, underscoring divergent energy trajectories across the region.

New US tariffs on India create a relative advantage versus some competitors in textiles, though exclusions remain limited. Barclays noted that FCNR(B) inflows have eased immediate rupee pressures ahead of the August policy meeting. Global risk sentiment improved on the oil slump, lifting emerging-market equities including Indian benchmarks.

Fed policy signals later this week could influence capital flows into India. Deficient monsoon risks remain a key external variable for agricultural output and food inflation.

RBI Watch

The RBI reiterated that the Indian economy remains resilient while flagging risks from Iran-related geopolitical tensions and a deficient monsoon. Barclays expects the central bank to hold rates at the August policy meeting, citing improved FCNR(B) inflows that have reduced rupee volatility concerns. Recent communications emphasize continued focus on inflation targeting, with June CPI at 4.38% providing room for steady policy.

Liquidity management has supported the currency through targeted interventions without altering the short-term rate, which stayed at 5.50%. Forward guidance continues to stress data dependence, particularly on monsoon progress and global oil prices. The committee voted to hold without specifying numerical splits in recent statements.

Markets now price limited probability of near-term easing, aligning with the RBI’s cautious tone on external risks.

India Macro Daily(Beta Mode)