Indian rupee weakens as services sector growth slows

NEW DELHI – The Indian Rupee depreciated against a strengthening US Dollar today, as India’s services sector experienced a slowdown in growth. The S&P Global Services Purchasing Managers’ Index (PMI) for November fell to 56.9, a decline from October’s 58.4 and below the anticipated 58.0 mark. Despite this deceleration, the sector continues to demonstrate significant expansion, maintaining above the 50-level threshold that distinguishes growth from contraction.

The economic forecast for India remains positive with S&P predicting a rapid growth rate of 7% by the fiscal year 2026-27. This optimism is reflected in the country’s stock market valuation surpassing $4 trillion, securing its position as the fifth-largest in the world.

Additionally, inflation readings have shown moderation with core Consumer Price Index (CPI) at 4.5% and overall CPI at 4.87% year-on-year as of October. These figures are consistent with expectations that the Reserve Bank of India (RBI) will likely maintain the repo rate at the current level of 6.5%.

In contrast to India’s services sector performance, US economic indicators have presented a mixed picture with an increase in ISM Services PMI to 52.7, indicating expansion in the services sector. However, there has been a decrease in JOLTS Job Openings to levels not seen since March 2021.

These developments are influencing market expectations regarding the Federal Reserve’s interest rate policy, with some investors anticipating a potential pause or reversal in rate hikes between March and May.

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