Currency Map:

USD/INR77.4476.92 0.67

Brent Crude closed at USD 111 VS prior week close of USD 112. Gold closed at USD 1810.Nifty closed at 15782 vs prior week close of 16411. 10 Year G-SEC Yield closed at 7.31%.

Major developments: USDINR traded in the 77.10-77.63 range last week and closed at 77.44 as against prior week close of 76.92. Rupee declined 0.67% w/w. EUR declined 0.43% w/w and GBP declined 0.35% w/w against Rupee. Indian benchmark Equity index declined 3.83% w/w. 10 Year G-SEC Yield closed at 7.31%. 1-year fwd premia is at 3.80% p.a.

Rupee decline accelerated and would have ended even lower but for RBI’S sporadic intervention. LIC IPO is to be listed this week and oversubscribed refunds may create some disturbance in FX market.

April CPI inflation surged to 8 Years high of 7.79%. Food inflation climbed to 8.38%. IIP climbed 1.39% in March. Mfrg climbed 0.9%. Mining and Power generation climbed 4% and 6.1% respectively .This data has cemented another rate hike by RBI in June.

USDINR fwd premia softened to 3.8% per annum for 1 year as 10 Year yield also dropped 15 bps to 7.31%. Equity markets slumped again, tracking fall in Global markets.

In 2022-23, FII’S have sold 19327 Cr of Equities till date and have sold Rs 3661 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.

Global developments: US S&P 500 slumped 20% from its peak and showed some signs of stabilisation at lower levels. Decline below 20% from peak in US broad based index could signal recession in US.

US headline CPI rose 0.3% mom in April, above expectation of 0.2% mom. CPI core rose 0.6% mom, above expectation of 0.4% mom. Fed member called for rate hikes in future meetings and predicted rates to climb to 3 to 3.5% before year end.

Euro did not receive any support despite some talks of normalising monetary policy. ECB President Christine Lagarde indicated that the asset purchases could end “early” in Q3, and interest rate hikes could start “only a few weeks” after that.

ECB board member said that normalization of monetary policy was “necessary and desirable”. But such normalization must be done gradually. He urged not to “over-react” to inflation rising across Europe or risk penalizing economic growth.

Global shortages of Chemical fertiliser could result in lower farm output. Food prices and energy prices will remain elevated.

India banned Wheat exports to stabilise Food prices at home. Due to high food and energy prices, Global inflation and consequentially rising interest rates are likely to hurt Global economies.

Focus will be on US retail sales data.

Currency range: USDINR: 77.15/76.95/76.78(support), 77.60 (resistance), EURINR:80.40/78.75 (support)/ 81.50/82.40 (Resistance), GBP/INR: 94.60-97.50, JPY/INR:.56-61

Suggestions: USD exports can be covered partially at 77.50+ .EURINR payables can be covered at 80.40/78.60. Receivables can be hedged at 82.40. GBPINR exports can be covered at 97.50+.

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