India Flash PMI Rises to 56.5 in September

The data matter because they show growth is holding up after a forecast-beating 7.8% expansion in the June quarter, but not at the blistering pace seen earlier this year. On the basis of September’s preliminary reading, the composite PMI averaged 55.1 for the quarter so far, down from 58.2 in April-June, suggesting momentum is easing rather than accelerating.

Manufacturing led the improvement, with the sector PMI climbing to 55.7 from 52.8, a seven-month high, as output and new orders strengthened and goods producers resumed hiring. Services also improved, with the index rising to 55.8 from 54.1, though the pace of job creation in the sector slowed.

A weaker export picture is the main caveat. New export orders increased at the slowest pace in 33 months, pulling overall export growth lower even as domestic demand kept activity in expansion territory. That matters for investors because it suggests India’s near-term resilience is still being driven more by internal demand than by external markets.

For equities and other risk assets tied to India’s growth story, the data support the case for continued earnings momentum in domestic cyclicals, industrials and consumer-facing companies. But the slowdown in export orders and softer hiring in services may temper hopes for a broad-based acceleration, especially if global demand weakens further.

The next test for markets will be whether the September improvement feeds through into official growth data and whether export demand stabilizes in the coming months.