Currency Map:

USD/INR76.4876.18 0.39

Brent Crude closed at USD 106 VS prior week close of USD 111. Gold closed at USD 1932.Nifty closed at 17171 vs prior week close of 17475. 10 Year G-SEC Yield closed at 7.21%.

Major developments: USDINR traded in the 76.09-76.53 range last week and closed at 76.48 as against prior week close of 76.18. Rupee declined 0.39% w/w. EUR climbed 0.24% w/w and GBP climbed 0.15% w/w against Rupee. Indian benchmark Equity index declined 1.73% w/w. 10 Year G-SEC Yield closed at 7.16%. 1 year fwd premia is at 3.95% p.a.

Rupee fell 30 ps, tracking rise of USD after Fed Chief’s comments on accelerated rate hikes. Steep decline in Equities and reports of downsized LIC IPO also soured sentiments.

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 steadied after steep climb to 7.23%.

In 2022-23, FII’S have sold 2861 Cr of Equities in April till date and have sold Rs 54 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 inflation soared to 4 month high of 14.55% in March vs 13.11% in Feb. WPI was at 7.89% on last March. Rise in crude prices and base metal prices were primary contributors to high inflation.

Indian stocks declined steeply on worsening war situation and lowering of Global economic growth. Global growth is now expected to be 3.2% as against 4.1% prediction in Jan. IMF has downgraded Indian GDP growth to 8.2%. Infosys margins and HDFC bank’s operating margins along with doubts over its merger with HDFC have catalysed the fall in these two heavy weights.

Global developments: Fed Chief delivered the clearest message on rates and confirmed other Fed member’s views on steep rate hikes. US Yields hardened and helped USD to gain against majors. Yen sell off continued, Pound broke the 1.30 support zone and Euro tumbled below 1.08. US Equities witnessed heavy sell off with US S&P 500 melting 2.77% on Friday alone.

Federal Reserve Chairman Jerome Powell said on Thursday that a 50 basis-point rate hike was on the table for the May meeting as the central bank aims to step up the pace of monetary policy tightening to curb elevated inflation.  The Fed chairman also backed the idea of the central bank hiking aggressively at the start of the tightening cycle, or front loading more than one 50 basis-point hike at future meetings.  Traders expect the Fed to hike rates by 50 basis points at each of the next three meetings in an attempt to curb demand, and overall inflation, which is well above the central bank’s 2% target.  

Euro declined after a brief rally to 1.0925, following ECB member’s hint on rate hikes.

ECB Governing Council member said in a Bloomberg interview, that it’s possible to hike interest rate in July. Meanwhile, QE could end at the end of June but the policy members will have to discuss it with new economic forecasts on hand.

Focus is on US Core PCE inflation data and GDP data.

Currency range : USDINR: 76.10/75.70( support), 76.50/76.70 (resistance), EURINR:82.20 (support)/ 83.50 (Resistance), GBP/INR: 98-100, JPY/INR:.56-61

Suggestions: USD exports can be covered on rally till 76.50/76.70.EURINR payables can be covered at 82.20/81.75. GBPINR exports can be covered at 100+.

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