India's economic growth shows signs of slowing down.

The Indian economy is exhibiting signs of a slowdown, with the Indian rupee experiencing its sharpest depreciation on record due to increased capital outflows, declining foreign exchange reserves, and expectations of a more accommodative monetary policy. Evidence suggests that India's economic growth is rapidly decelerating, prompting investors to seek alternative assets in other Asian markets. Additionally, there is anticipation that the Reserve Bank of India (RBI) might cut interest rates due to declining inflation and sharply reduced GDP growth forecasts.

India's foreign exchange reserves dropped to $640 billion in the final week of 2024, marking the lowest level since April and continuing to fall from an all-time high of $704.9 billion. This decline is attributed to the rapid outflow of foreign capital, driven by slowing domestic growth that has discouraged investors from participating in the country's equity markets. This trend aligns with the recovery in government bond yields and the decline in the Sensex index, forcing the RBI to draw down reserves to prevent the rupee from depreciating too quickly.

India's manufacturing PMI fell to 56.4 in December, representing the weakest expansion since 2023. The slowdown was mainly driven by weaker output growth, including a deceleration in new foreign orders. However, a strong labor market showed an increase in employment for consecutive months. Input cost inflation remained moderate, while output prices rose sharply. Despite the challenges, business confidence in manufacturing improved, buoyed by expectations of robust investment and demand in 2025.

The services PMI declined to 59.3 in December, marking the 41st consecutive month of growth. The services sector continued to benefit from sustained domestic demand growth, with new orders rising at the fastest pace in four months, leading to accelerated employment growth. However, input cost pressures mounted due to rising raw material prices, wages, and material costs. Business confidence in the services sector fell to a six-month low, though it remained above the long-term average, as new business developments added persistent pricing pressures.

India's economy is projected to grow by 6.4% in 2024, with data collection concluding in March 2025. This forecast marks the slowest growth since 2020, when the pandemic impacted the economy, and is a decline from the 8.2% growth recorded the previous year. The slowdown is largely attributed to a significant buildup of inventories, despite increased private and government spending. Export growth accelerated, while imports contracted. Manufacturing growth is expected to decelerate significantly, though a strong agricultural sector helped offset some of the slowdown in 2024.

India's inflation rate dropped to 5.22% in December, in line with market expectations of 5.3%, and remains within the RBI's target range of 4–6%. Food price inflation, which constitutes nearly half of India's consumer basket, eased slightly to 8.39%, while inflation for fuel and energy fell sharply. This indicates that future price trends may slow further.

Techical analysis data (5H)

Resistance: 86.675, 86.752, 86.851

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 86.4 - 83.989 but cannot break the support at 83.989, you may set a TP at approximately 86.752 and SL at around 86.323 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 86.675 - 86.752, you may set a TP at approximately 86.851 and SL at around 83.9 25or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 86.675 - 86.752 but cannot break the resistance at 86.675, you may set a TP at approximately 86.4 and SL at around 86.851 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 86.4 - 83.989, you may set a TP at approximately 86.323 and SL at around 86.752 or according to your acceptable risk.

Pivot point January 16, 2025 09:45 PM. GMT+7