Currency Map:

USD/INR78.3478.07 0.34

Brent Crude closed at USD 113 VS prior week close of USD 113. Gold closed at USD 1828.Nifty closed at 15699  vs prior week close of 15293. 10 Year G-SEC Yield closed at 7.44%.

Major developments: USDINR traded in the 77.87-78.38 range last week and closed at 78.34 as against prior week close of 78.07. Rupee declined 0.34% w/w. EUR climbed 0.56% w/w and GBP climbed 0.23% w/w against Rupee. Indian benchmark Equity index climbed 2.65% w/w. 10 Year G-SEC Yield closed at 7.44%. 1-year fwd premia is at 3.05% p.a.

Rupee continued to weaken, but fwd premia declined steeply as USD/INR interest rate differentials shrunk. 1 Year premia declined to 3.05% p.a.

Indian Capital account recorded a net outflow of USD 1.7 bn in Q4 FY22 as compared to a surplus of USD 22.5 bn in Q3 FY22. The deficit in capital account was led by net portfolio outflows of USD 15.2 bn. Net FDI inflows rose to a 5-quarter high of USD 13.8 bn in Q4. BoP recorded a deficit after a hiatus of 12 quarters due to deficit in both current account and capital account. BoP deficit stood at USD 16 bn in Q4 from a surplus of USD 0.5 bn in Q3 FY22 and USD 3.4 bn in Q4 FY21. For full FY22, CAD stood at 1.2% of GDP vs. a surplus of 0.9% recorded in FY21 due to wider trade deficit. Trade deficit widened to USD 190 bn in FY22 from USD 102 bn in FY21 led by higher imports.

In 2022-23 fiscal, FII’S have sold 89224 Cr of Equities till date and have sold Rs 5593 Cr of debt till date. In 2021-22, FII’S net sold Rs 128897 cr in Equity segment and have net bought Rs 4805 cr of debt. In 2020-21 financial Year, FII’S nett bought Rs 2,74,203 Cr of Equities and have sold Rs  42820 Cr in debt.

FX reserves stands at USD 601.1 bn.

USDINR has supports at 77.85. Resistance is expected near 78.50/78.65. Rupee movement will depend on Crude price and USD movement against majors. Considering hike in Global interest rates and its softening impact on growth, Crude Oil prices could moderate providing relief to Rupee and Indian inflation. RBI’S action will also impact Rupee as RBI has sold USD at every high level to contain bigger fall.

Global developments: Economic data was limited. Fed Chairman’s testimony was the dominant event. He acknowledged the prospect of recession, sending long term bond yields lower. Fed Chairman Powell said the Fed is “strongly committed” to bringing down inflation that is running at a 40-year high while policymakers are not trying to cause a recession in the process.

EU, UK PMI data declined steeply raising fears of imminent GDP contraction. UK retail sales and German Ifo survey slipped further.

US Consumer spending and Core PCE data will be keenly watched. A wrath of economic indicators are expected to confirm the trend of weakening business activity.  US consumer confidence is expected to post a sharp decline, as personal incomes struggle to keep up with inflation.

Commodity prices declined further and offered support to Global Equity markets. Short covering has pushed markets higher.

EUR/USD is consolidating and its movement will depend on ECB Chief’s statement on rates. Short covering can push EUR/USD higher.

Currency range: USDINR: 77.85/77.45(support), 78.50/78.65 (resistance), EURINR:81.50 (support)/ 82.60/83.50/84.25 (Resistance), GBP/INR: 96-98.50, JPY/INR:.58-63

Suggestions: USD exports can be covered partially at 78.35+. EURINR payables can be covered on decline to 81.70. GBPINR exports can be covered.

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