Business sentiment among Indian companies rose for the second consecutive month in February, as companies increased production on the back of rising orders, a monthly survey said yesterday. The MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, rose to 63.5 this month from 61.8 in January.
The increase in sentiment was solely led by manufacturing firms where confidence was at a seven-month high. More companies reported a rise in new orders and export orders, encouraging them to increase production. The growth in demand also boosted the labour market, with firms increasing their workforce following almost two years of nearly stable employment levels, the survey added. "On the whole, the brighter tone of the February survey provides an early signal that the trend decline in sentiment since peaking in September 2014 may have run its course. Most key parameters of the survey including New Orders, Production and Employment showed strength," MNI Indicators Chief Economist Philip Uglow said.
It was encouraging to see a pick-up in sentiment in most key parameters of the survey this month, in spite of no change in the key policy rate at the last monetary policy meeting on February 2, the survey said. "On the costs side, though, companies were finding it hard to fully capitalise on the positives of lower commodity prices, with the decline in the rupee hurting profits," Uglow said. Growing inflationary expectations will in turn make the RBI's path of inflation targeting more arduous, Uglow added. One of the negatives in this month's survey was the impact of the rupee on business operations.
Companies lamented that the weakness in the rupee was offsetting benefits of a decline in global commodity prices, especially crude oil, the survey said.