Aberdeen Standard defensive on India, deems Centre's measures insufficient

Prime Minister Narendra Modi last month declared a $265-billion rescue package - equivalent to 10 per cent of the gross domestic product.

Aberdeen Standard Investments has adopted a “defensive stance” towards India in the short term, as government measures to support the economy have fallen short of reviving demand with lacking key reforms.

Prime Minister Narendra Modi last month declared a $265-billion rescue package — equivalent to 10 per cent of the gross domestic product — to help support businesses hit by one of the world’s strictest stay-at-home order as the nation grapples with an increase in coronavirus infections. Yet, almost half of the stimulus comprised monetary measures announced since February.

“We view the package as a tad underwhelming, given that it does little to boost demand or relieve stress for companies and sectors that have effectively come to a standstill during the lockdown,” Kristy Fong, senior investment director for Asian Equities, said in an email. It also lacked tax breaks or a plan for infrastructure spending and reforms to support the manufacturing sector.

The money manager, which oversees over $644 billion of assets globally, now has “heaviest exposure” relative to the benchmark in software exporters, materials, especially cement, and consumer staples. It expects stocks to remain volatile while the outbreak likely to be a hindrance to global economic recovery.

“State coffers have been hurt by the coronavirus relief measures, further limiting fiscal levers,” Fong said.

India services PMI expands at fastest pace in 5 months on buoyant demand

Demand rose at the fastest pace in more than three years.

BS : Activity in India's dominant service industry accelerated to a five-month high in December as demand rose at the fastest pace in more than three years, a private business survey showed on Monday.

The findings are likely to provide some relief to markets and spur hopes of an economic recovery in Asia's third-largest economy, which registered its weakest growth since 2013 in the July-September quarter.

The Nikkei/IHS Markit Services Purchasing Managers' Index rose to 53.3 in December from November's 52.7, holding above the 50-mark that separates growth from contraction for the second straight month.

"It's encouraging to see the Indian service sector continuing to recover from the subdued performances noted in September and October," Pollyanna De Lima, principal economist at IHS Markit, said in a release.

"More importantly, the news of sustained job creation, robust new order growth and a pick-up in business confidence suggest that expansion can be maintained in the early part of 2020."

A sub-index tracking new business climbed to its highest since October 2016, encouraging firms to increase headcount.

Service providers were more optimistic about growth in the year ahead and international demand continued to rise.

A strong service sector is crucial India as it contributes over 60% of gross domestic product. If the momentum can be sustained, it would drive a faster economic recovery.

A sister survey on Friday showed factory activity accelerated at the fastest pace in seven months in December on strong domestic demand and output.

Taken together, they pushed the composite PMI, which includes both manufacturing and services, to 53.7 last month from November's 52.7, its highest in five months.

"With manufacturing sector weakness also fading in December, what was anticipated to be a disappointing private sector performance for the third quarter of fiscal year 2019/20 is now looking brighter," De Lima said.

However, prices charged by service firms increased at the fastest pace in nearly two years after a sharper rise in input cost forced businesses to transfer some of the inflationary pressure to consumers.