WEEKLY SYNOPSIS (18/01/19)

Major highlights: Rupee declined 1% w/w  to close at 71.19 on 18/1. 

Indian Equity indices gained 1% w/w.

-Rupee declined despite declining trade deficit.Indian Exports remained flat at USD 27.93 bn in Dec. Imports declined -2.44% to USD 41 bn. Trade defict narrowed to USD 13.07 bn. Apr- Dec exports is still up by 10.18% to USD 254.44 bn.Imports is up 12.6% in Apr-Dec period to USD 386.65 bn.

-Indian IIP declined to register a meagre growth rate of 0.5% in Nov as against 8.4% in Oct. Mfrg sector contracted 0.4% in Nov. Capital Goods sector declined 3.4% in Nov. Mining grew by 1.4% and power generation grew by 3.9%, all below Nov 2017 data.

Indian CPI inflation declined to 2.19% in Dec as against 2.33% in Nov. WPI inflation declined to 3.83% in Dec. Food price inflation was at -2.51%.

-Lower inflation and sagging IIP data could prompt RBI to cut rates by 25 bps in Feb meeting.

-Focus is on Feb 1 st Union budget. Since this is an election year budget, there is increased expectation of tax reliefs and additional benefits to farm sector.

-FII’S have sold Rs 1983 Cr of Indian Equities in Jan till date . FII’S have sold Rs 2460 Cr of 

Indian debt securities in Jan till date . 

-Crude climbed last week. WTI Crude is now at USD 53.70 and Brent Crude is now at USD 62.60.

-Global Equities led by US continued to climb on hopes of US-China trade resolution and Fed Chairman’s statement that Fed could be flexible and patient in further rate hikes.

-Global developments were dominated by BREXIT and US-China trade talks. BREXIT plan was defeated in UK parliament.

-US Treasury yield differential widened. US Govt shutdown continued.

Next week important events: ECB and BOJ meetings.

Projected range for coming week: USDINR: 70.50-72, EURINR:80.50-82, GBPINR:89.50-93.50, JPYINR: 0.63-0.66

Suggestions: Hedge USD receivables on rally to 72. USD payables can be hedged on decline 

to 70.50-70.10 levels. EURINR payables can be hedged at 80.50. Receivables can be hedged at 82/82.50.