Weak demand weighs on sentiment and company financials
Business sentiment in India eased for the second consecutive month in December as orders weakened and disinflationary pressures intensified, research firm MNI Indicators said on Tuesday.
The MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, fell slightly to 60.7 in December from 60.9 in November, it said.
The fall in sentiment was observed across both manufacturing and service companies, while sentiment among construction sector companies rose, offsetting the previous month’s sharp fall.
Confidence has gradually declined throughout this year, with the Business Sentiment Indicator averaging 61.3 in the three months to December, the weakest quarter in 2015 and the lowest out turn since Q4 2013.
Weak domestic demand continues to bear down on business confidence. Production and New Orders were down 9.7% and 8.6% on the year respectively in December, with the latter now 12.5% below last year’s average. More positively, there was an increase in foreign demand for India’s goods and services for the second consecutive month with the Export Orders Indicator rising 6.1% in December.
Companies faced lower costs for raw materials and other inputs owing to the fall in crude oil and other commodity prices. Some companies reported that they had passed on these cost savings to their customers, while several reported that they had cut their prices even more sharply owing to high competition and low demand, MNI Indicators said. This may well explain the fall in the Financial Position Indicator to the lowest since October 2013, it added.