Currency Map:

USD/INR76.1875.91 0.35

Brent Crude closed at USD 111 VS prior week close of USD 102. Gold closed at USD 1972.Nifty closed at 17475 vs prior week close of 17784. 10 Year G-SEC Yield closed at 7.21%.

Major developments: FX market was truncated last week. USDINR traded in the 75.79-76.26 range last week and closed at 76.18 as against prior week close of 75.91. Rupee declined 0.35% w/w. EUR climbed 0.32% w/w and GBP climbed 0.26% w/w against Rupee. Indian benchmark Equity index declined 1.73% w/w. 10 Year G-SEC Yield closed at 7.21%. 1 year fwd premia is at 4.08% p.a.

Rupee declined tracking gains in Crude prices. Equity markets also declined and FII’S sold last week. Indian inflation climbed to 6.95 % in March. India’s factory output, measured in terms of Index of Industrial Production (IIP), witnessed a growth of 1.7 per cent in February. Food inflation spiked to 7.85% vs 5.85% in Feb. RBI’S inflation band is 4 to 6% and with CPI data spiking above 6%, RBI may shift to neutral stance in June and hike rates by 50 bps before Sept.

Indian FX reserves dipped steeply to 604 bn as on April 8 th. FX reserves had swelled to USD 650 bn two months ago. RBI’S intervention to maintain steady FX rates may have been the primary reason for decline in reserves. 10 Year yield jumped further to 7.21%.

In 2022-23, FII’S have bought 3188 Cr of Equities in April till date and have bought Rs 987 Cr of debt in April, 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.

WPI data is the focus next week and upside data will add pressure on RBI. Rupee and Equity markets will be at the mercy of international developments.

Global developments: Euro declined and GBP stabilised against USD. Yen sell off continued on rising US yields. 10 Year yield jumped to 2.83%.

ECB announced that the Asset Purchase Program “should be concluded in the third quarter. Monthly net purchases under the APP will continue to be EUR 40B in April, EUR 30B in May and EUR 20B in June. The calibration of net purchases for Q3 will be data-dependent and depend on the outlook.

US consumer price index surged 1.2% last month, the biggest monthly gain since September 2005, the Labor Department said on Tuesday. The CPI advanced 0.8% in February. This is due to surge in Gasoline prices. CPI data will put further pressure on Fed to consider 50 bps rate hike.

UK GDP grew 0.1% mom only in February, below expectation of 0.3% mom. Services was the main contributor to growth, up 0.2% mom. But that was offset by -0.6% mom contraction in production, and -0.1% mom in construction.

Overall monthly GDP was 1.5% above its pre-coronavirus level in February 2020. Services was 2.1% above that level while construction was 1.1% above. However, production was -1.9% below.

US earnings season is underway. This will give information on travel, demand, supply chain issues and corporate margins. Economic data releases for the week will focus on manufacturing activity, housing data, and the flash PMI readings for April.  The US economy is still on solid-footing, so expectations across a wide range of economic data is expected to moderate.

Currency range : USDINR: 75.95/75.70( support), 76.30/76.70 (resistance), EURINR:82.20 (support)/ 83.50 (Resistance), GBP/INR: 98-100, JPY/INR:60-62.

Suggestions: USD exports can be covered on rally till 76.30/76.50/76.70. Payables can be covered at 75.95/75.70/75.55. EURINR payables can be covered at 82.20. GBPINR exports can be covered at 100.50+

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