The S&P Global PMI survey for India's services sector shows conditions eased but remained very strong in July with the survey's main business activity index steady at 60.3 from 60.5 in June. This compares with the flash estimate of 61.1. The manufacturing sector PMI, published last week, showed similar moderation but ongoing strength, with its headline index edging lower from 58.3 to 58.1. The composite index covering both sectors fell from 60.9 in June to 60.7 in July, below the flash estimate of 61.4.

With these PMI surveys showing very robust conditions in the Indian economy, the Reserve Bank of India's focus will likely remain on risks to the inflation outlook at its policy meeting later in the week.

Respondents to the service sector survey reported output, new orders and new export orders all grew at a very strong pace in July. The survey also shows another big increase in payrolls while its measure of business confidence continues to indicate respondents expect further strong growth in output over the next twelve months. Respondents reported stronger price pressures, with the survey showing a bigger increase in both input costs and selling prices.

July's services PMI is expected to rise further to 61.1 versus June's very hot 60.5 and May's nearly as hot 60.2.

The Services Purchasing Managers' Index (PMI) is a joint publication by Markit and the Nikkei media organisation and provides an estimate of business activity in private sector services for the previous month by using information obtained from a representative sector survey incorporating around 800 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the Markit PMIs, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the report shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the diffusion index. This index is the sum of the positive responses plus a half of those responding the same.

The Purchasing Managers' Index (PMI) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.