India's service sector continued its growth in June, though at a slightly slower rate than in May, according to the latest HSBC PMI data released Wednesday.

HSBC's services purchasing managers' index -- an index of Indian services sector activity -- posted 54.3 in June, 2012, a decline of 0.4 percent compared to 54.7 in May, 2012. However, the India Composite Output Index rose in June, posting 55.7 up from 55.3 in May, because of the fastest expansion of output of both manufacturing and service sectors in the past four months.

The data depicted that new orders, jobs and manufacturing production that increased at the sharpest pace since February reflected in the growth rate.  

While service sector activity grew at a slightly slower pace, new orders grew faster and this should hold up activity in coming months, said Leif Eskesen, Chief Economist for India & ASEAN at HSBC.

The jobs in service sector showed an expansion for the fourth consecutive month in June and the increase was the highest in a year. The jobs index grew to 51.1 in June from 50.5 in May.

Moreover, employment picked up, which helped reduce the backlogs of work, and businesses remained relatively optimistic about the outlook for the coming 12 months, although sentiments eased a bit from the previous month, Eskesen said.

However, a slump in demand, especially from the U.S. and euro zone in June, has hit the confidence level of Indian companies regarding their future, said the report.

Meanwhile, input prices at Indian services companies rose sharply and continued their upward trend for the last 39 months. The output prices also rose in the service sector in June, recording an increase for the 10th consecutive month.

In June the inflation readings for input and output prices were broadly unchanged from May and remain high by historical standards, Eskesen added.

Though business expectations remained positive at service companies in June, the level of optimism declined to the lowest since March, the report said.

The HSBC India Services PMI  is based on data collected from 350 private service sector companies and the Composite PMI is from the survey data compiled from over 800 companies from Indian manufacturing and service industries.