India’s services sector showed continued strength in July 2025, maintaining a solid growth momentum driven by robust domestic demand and strong international sales. However, the financial markets opened on a cautious note amid renewed geopolitical tensions and anticipation around the Reserve Bank of India’s upcoming monetary policy decision.
According to the HSBC India Services Purchasing Managers’ Index (PMI) report released on Tuesday, the seasonally adjusted Services Business Activity Index rose to 60.5 in July from 60.4 in June, signalling the second-fastest pace of expansion in nearly a year. This sustained performance underscores strong underlying demand conditions across various service categories, especially finance and insurance.
The Purchasing Managers’ Index (PMI) is an economic indicator derived from monthly surveys of private sector companies. In this context, it measures business activity in the services sector based on variables like new orders, employment, and output.
“Services PMI at 60.5 indicates a firm growth trajectory, backed by a notable pick-up in new export orders,” said Pranjul Bhandari, Chief India Economist at HSBC. She added that while both input and output prices rose slightly faster than in June, broader inflationary trends may be moderating, as hinted by recent CPI and WPI figures.
Survey participants attributed the output boost to sustained new business intakes, aided by advertising strategies, client onboarding, and improved international interest. Indian service providers saw increased orders from key markets such as Asia, Canada, the UAE, Europe, and the US.
Finance and Insurance emerged as the top-performing sub-sector in both new business and overall activity, while Real Estate and Business Services lagged behind. Despite varying sectoral trends, optimism among service providers remained high, driven by digital expansion, marketing efforts, and expectations of operational efficiencies.
However, even as the services economy remained buoyant, investor sentiment in the equity markets was slightly dampened due to external factors. The Sensex declined by 199 points (0.25%) to 80,819, and the Nifty fell by 44 points (0.18%) to 24,678.70 during early trade on Tuesday. Sectorally, FMCG stocks led the decline, followed by marginal losses in banking and IT.
Much of the caution stemmed from US President Donald Trump’s renewed threat to impose higher tariffs on India over its continued oil imports from Russia. Market analysts warned that this could weigh heavily on foreign investor sentiment if escalated into a broader trade confrontation.
Technical indicators suggested that unless the Nifty crosses the 24,956 mark, bearish undertones may persist in the short term. Vikram Kasat of PL Capital noted that resistance lies between 24,900 and 25,000, with key support zones at 24,550 and 24,442.
Despite this, some investors are banking on positive domestic cues. Optimism ahead of the RBI’s Monetary Policy Committee (MPC) meeting, where a potential 25 basis point rate cut is anticipated, could provide a much-needed uplift to equities.
Globally, stock markets reflected growing confidence. US indices rallied overnight, with the Dow Jones up 1.34%, Nasdaq gaining 1.95%, and S&P 500 advancing 1.47%, buoyed by expectations of a Fed rate cut in September. The probability of such a move jumped dramatically after July’s US jobs report, with market-implied odds rising to 92.1% from just 40% last week.
Asian markets mirrored this sentiment with positive openings: South Korea’s Kospi 200 surged 1.09%, Japan’s Nikkei 225 rose 0.63%, and China’s Shanghai Composite added 0.52%. The Hang Seng in Hong Kong also edged higher by 0.14%.
Meanwhile, foreign portfolio investors (FPIs) continued their cautious stance, net selling Indian equities worth ₹2,566 crore on Monday. In contrast, domestic institutional investors (DIIs) acted as stabilising forces, purchasing stocks worth ₹4,386 crore.
As domestic demand keeps India’s services engine running and global trends offer mixed signals, all eyes now turn to the RBI policy decision later this week, which may define the short-term trajectory for both services sentiment and market performance.
