Services Sector Momentum Remains Strong
The latest services PMI data for March confirms the Indian economy is running strong, beating what were already high expectations. This figure of 57.5 marks the 32nd consecutive month of expansion, a trend suggesting broad-based strength in the services sector. This continued momentum signals robust domestic demand is still the primary engine for growth. We should see this as a clear signal that the Reserve Bank of India will remain on hold in the coming weeks. With economic activity this brisk and core inflation still sticky around 4.6%, the case for an interest rate cut is significantly weakened. This data gives the central bank more room to prioritize price stability over stimulating further growth. For equity traders, this reinforces a bullish stance on Indian indices. The strong economic undercurrent should translate to healthy corporate earnings, particularly in financial services and consumer discretionary sectors. We can expect the Nifty 50 to test its recent highs, as this data dampens fears of a slowdown that we saw surface briefly in late 2025. In the currency market, the strong PMI reading should provide a floor for the Rupee. A hawkish RBI and strong growth inflows will likely keep the USD/INR pair contained, with traders potentially targeting the lower end of its recent 83.10-83.50 range. Any significant strength in the US dollar globally might present an opportunity to sell into rallies.Rates Market Expectations Reset
This changes the calculus for interest rate futures, as the market will now have to push back its timeline for expected rate cuts. The 1-year Overnight Index Swap (OIS) rate, recently trading around 6.45%, will likely face upward pressure as bets on a mid-year rate reduction are unwound. We should anticipate a flatter yield curve as short-term rates are repriced to reflect a more patient central bank. Create your live VT Markets account and start trading now.
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