The Nikkei Business Activity index climbed to a ten-month high of 53.6 in December from 50.1 in November, thanks to a solid rise in incoming new work.

The growth of private sector output in December was largely driven by services sector as manufacturing production decreased for the first time since October 2013.

Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output index, which maps both manufacturing and services sectors, rose to 51.6 in December from November's five-month low of 50.2.

In the first contraction in over two years, manufacturing sector output dipped in December to a 28-month low as new orders fell sharply and production took a big hit from heavy rains in Chennai.

The survey noted that even as service providers sentiment improved in December, the degree of confidence was the second-weakest. Business sentiment was restricted by worries regarding the consequences of natural disasters, it added.

Given a sharp deterioration in manufacturing output in China as well, the experts believe the global headwinds can make things even worse for the Indian markets, which will add to the pressures on RBI to keep rates low.

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