Strong purchasing manager's index numbers for the month of December failed to change Nomura's view of a possible slowdown in GDP growth in fiscal 2024.
The brokerage kept its prediction that GDP growth will slow to below-consensus 5.1% in fiscal 2023, down from 6.6% in fiscal 2023, according to its investor note. This will likely be driven by spillovers from the recession in developed markets and the lagged impact of domestic monetary policy tightening.
"Solid December PMI data do not change our view," the brokerage said, calling PMI as "poor predictors of growth" in gross value added, historically.
"The solid PMI readings suggest resilient domestic demand, even in the face of weakening exports, which contrasts with our view of an impending cyclical slowdown," Nomura said.
However, the real economic data for November and December, according to the brokerage, points out that overall activity may have peaked around mid-2022, with consumption and the services sector lagging while the industrial sector has fared relatively better.
The recession in developed markets may be shallower but more long-lasting, Nomura said. The spillovers on India's domestic growth, it added, will likely be large while hitting the export sector, manufacturing sector, and capex plans.
Meanwhile, tightening monetary conditions implies that customers who had been at the forefront of consumption recovery may be affected in 2023 as well. "Hence, we remain comfortable with our view," the house said.
The gauge of India's services sector performed well in December.
The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 56.4 in November to 58.5 in December.
This indicated the strongest rate of expansion since mid-2022, according to a media statement. The S&P Global India Composite PMI Output Index rose from 56.7 in November to 59.4 in December, indicating the quickest growth since January 2012.
The services PMI rose to a six-month high of 58.5 in December from 56.4 in November, primarily driven by the finance and insurance segments, while real estate and business services lagged in terms of new orders, Nomura added.
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