India's HSBC Composite PMI misses estimates in June: What 57.1 means for the Indian Rupee

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The final reading of India's HSBC Composite Purchasing Managers Index (PMI) was revised down to 57.1 in June from the previous reading of 57.4, the latest data published by S&P Global and HSBC Bank showed on Friday. This figure came in worse than the estimates of 57.4.

What do India's HSBC PMI data mean for the Indian Rupee?

India's HSBC Composite PMI is a leading indicator gauging business activity in India. This figure is calculated by weighting together comparable manufacturing and services indices using official manufacturing and services annual value added. Meanwhile, the Services PMI is a leading indicator gauging business activity in India’s services sector.

Stronger-than-expected PMI readings signal stronger factory activity and economic momentum, reducing expectations for monetary easing, while weaker-than-expected data tends to weigh on the Indian Rupee by raising concerns about growth and increasing the likelihood of a more accommodative RBI stance.

Technical Analysis: USD/INR maintains a positive bias above the 100-day SMA

In the daily chart, USD/INR holds a mild bullish bias as it consolidates above the 20-day simple moving average (SMA) of the Bollinger Bands and the broader 100-day SMA. The pair is edging along the upper half of its recent volatility envelope, while the Relative Strength Index (14) at about 54 stays in neutral-to-positive territory, suggesting modest upside momentum without yet reaching overbought conditions.

On the downside, initial support emerges at the Bollinger midline around 94.85, ahead of a deeper cushion from the lower Bollinger band near 94.00 and the 100-day SMA clustered just below. On the topside, the first notable resistance is the upper Bollinger band at around 95.75; a daily close above this barrier would open the door to further gains, whereas failure to clear it could keep USD/INR confined to a range above the mid-band support.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

HSBC Composite PMI

The Composite Purchasing Managers Index (PMI), released on a monthly basis by S&P Global and HSBC Bank, is a leading indicator gauging business activity in India This d by weighting together comparable manufacturing and services indices using official manufacturing and services annual value added. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the Indian private economy is generally expanding, a bullish sign for the Indian Rupee (INR). Meanwhile, a reading below 50 signals that the activity is generally declining, which is seen as bearish for INR.

Indian Rupee FAQs

What are the key factors driving the Indian Rupee?

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

How do the decisions of the Reserve Bank of India impact the Indian Rupee?

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

What macroeconomic factors influence the value of the Indian Rupee?

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

How does inflation impact the Indian Rupee?

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.

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