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Leading brokerage house Nomura said the manufacturing PMI, which in September remained stable at 52.8, shows the worst for Indian economy is over, but warned that a V shaped recovery is way off.

 

 Nomura said in a note that "The manufacturing PMI has been consolidating at the 52.8/52.9 level for three months now. This is in line with our proprietary composite leading index for India, which suggests that the economy is bottoming out and should begin to improve. However, we do not expect a V shaped recovery like 2009 due to weak global demand.”

 

 However, the brokerage house warned that given rising orders, there is an intended inventory accumulation: both raw material and finished goods inventory rose much more than the rise in new orders, leading to a fall in the new orders to inventory ratio to 1.03 from 1.06 in August, suggesting a risk if the expected demand pickup does not materialize.

 

 Nomura concluded that “We believe that GDP growth is bottoming out and we should see a marginal rise in the coming quarters. Output prices have eased in September, but with input cost pressures again on the rise and demand stabilizing, the risk of a pass-through remains.”

 

 According to the latest data released by HSBC's purchasing managers' index, the manufacturing PMI growth held steady in September at 52.8, supported by faster output growth and rising export orders. The September manufacturing PMI a measure of factory production at 52.8, same as in August, points to a significant improvement in the key sector which witnessed the weakest growth rate in nine months in August. An index reading below 50 indicates contraction.

 

 A stable PMI in September shows that both external and domestic demand is improving. In September, the output sub-index improved to 53.2 from 52.7, new orders rose to 54.4 from 54.3. Export new orders index rose to a four month high of 53.8 from 49.2, rising above the 50-level for the first time since June