Currency Map:

USD/INR 74.20 74.11 0.12
EUR/INR 87.82 86.83 1.15
GBP/INR 97.32 96.48 0.87
JPY/INR 71.86 71.25 0.85

Brent Crude closed at USD 39.36VS prior week close of USD 37.84. Gold closed at USD 1953.

Nifty closed at 12263 vs prior week close of 11642.

10 Year G-SEC Yield closed at 5.84%.

Major developments: USDINR traded in the 73.87-74.86 range and closed at 74.20 as against prior week close of 74.11, declineof 0.12% for Rupee w/w. EUR climbed 1.15% and GBP climbed 0.87% against Rupee. Indian benchmark Equity indices climbed 5.15% w/w basis. 10 Year G-SEC Yield closed at 5.84%.

Rupee declined steeply to 74.86 last week, tracking volatility in Global markets. However, it quickly regained to close the week with nominal decline. Rupee’s weakness could be intact till 73.60 is not broken on the downside. Rupee has potential to decline and close Nov at levels above 74.75. However, Equity market rally intensified due to combination of factors viz., Liquidity, better than expected corporate performance and steady improvement in economic indicators. Indian PMI(composite) index surged to 12 year high of 58.9. Auto sales in festive season was better than last year. Cement, paint, pharma, FMCG, banks are reporting bullish commentary and are enthusiastic about growth in coming quarters. Rural demand and infra growth in rural sector is a big positive gain.

FII’S nett bought Rs 16994 Cr ofIndian Equities in Oct . FII’S nett bought Rs 3776 Cr of Indian debt securities in Oct . In this financial year, FII’S have nett bought Rs 96478 Cr of Equities and have sold Rs  31032 Cr in debt. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.

Global developments:US election result uncertainty remained even days after the polling, though it is becoming clear that Mr Biden may finally be installed as the next President.

The biggest question on investors’ minds with respect to government policy is the size and scope of the next fiscal support package. Assuming a Biden win and Republican Senate, the package is likely to be smaller than the roughly $2.5 million CARES act.

Focus will be on tackling corona virus as Europe entered into new phase of lock down.

Federal Reserve on Thursday kept its monetary policy loose and pledged to do whatever it takes to sustain an unsteady U.S. economic recovery.On the economic developments, the Fed reiterated that the pandemic is “causing tremendous human and economic hardship across the United States and around the world”. It noted that “economic activity and employment have continued to recover but remain well below their levels at the beginning of the year”.

US non-farm payroll employment grew 638k in October, above expectation of 600k. Unemployment dropped sharply to 6.9%, down from 7.9%, well below expectation of 7.7%.

BOE raised the size of asset purchases (QE) by +135B pound to 875 pound. BOE staff has downgraded the country’s economic outlook in its latest projections. Driven by the fresh lockdown measures, the staff now projects a double dip in domestic economy, expecting contraction in 4Q20. 

Important developments in coming week: US election outcome and new President’s priorities.

Currency range forecast: USDINR:73.70(support)-74.50/74.90(Resistance), EURINR: 87(support), GBPINR: 96(support), JPYINR: 68-73.

Suggestion: Cover USD import payables on decline to 73.95/73.75. USD receivables can be hedged later+.EURINR payables can be hedged on decline to 87. GBPINR receivables hedging can be done on rally to 99levels.

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