Currency Map:

USD/INR 74.60 74.20 0.53
EUR/INR 88.26 87.82 0.50
GBP/INR 98.44 97.32 1.56
JPY/INR 71.29 71.86 -0.79

Brent Crude closed at USD 42.70VS prior week close of USD 39.36. Gold closed at USD 1888.

Nifty closed at 12780 vs prior week close of 12263.

10 Year G-SEC Yield closed at 5.88%.

Major developments: USDINR traded in the 73.83-74.75 range and closed at 74.60 as against prior week close of 74.20, declineof 0.53% for Rupee w/w. EUR climbed 0.50% and GBP climbed 1.56% against Rupee. Indian benchmark Equity indices climbed 4.20% w/w basis. 10 Year G-SEC Yield closed at 5.88%.

It was a eventful week dominated by Govt stimulus announcements. FM unveiled Production linked scheme and AtmaNirbhar 3 measures.

Govt approved production linked incentive for 10 sectors totalling Rs 1.35 lac cr over 5 years.Sectors covered arepharmaceuticals, automobiles and auto components, telecom and networking products, advanced chemistry cell battery, textile, food products, solar modules, white goods, and specialty steel. PLI is aimed tomake Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology, ensure efficiencies, create economies of scale and  enhance exports.

FM announced more measures for housing, exports, agri, rural and credit extension schemes. FM also expressed satisfaction at economic recovery as major institutions have started to upgrade Indian growth outlook. Moody’s has projected strong recovery in next fiscal and Goldman sachs expects 10% growth in Indian economy next year.

New measures included 1) extension of Credit guarantee scheme, 2) Expansion of companies under ECGLS to include turnover of Rs 500 cr, 3) Employment incentives through EPFO, 4) Tax change for house buyers below the circle rate, 5) Cut in guarantee amount for Govt and PSU projects, 6) Increased outlay for urban housing uner PM Awas yojana, 7) Increase in allocation under MNREGA, 8) Funds for covid vaccine research, 9) Increase in NIIF outlay.

FM also outlined the progress achieved in earlier measures under AtmaNirbhar 1 and 2.

On data front.Indian IIP climbed 0.2% in Sept as against -8% in Aug. Mfrg declined -0.6%. Mining climbed 1.4% and Power sector climbed 4.9%. CPI inflation jumped to 7.61% in Oct vs 7.27% in Sep. Food inflation climbed to 10.16% in Oct as against 9.8% in Sep. Core inflation also climbed to 5.47% in Oct.

Indian trade deficit for Oct 20 was reported at 8.71 bn US as against USD 11.75 bn in Oct 2019. Exports declined 5.12% in Oct to USD 24.89 BN. Imports fell 11.53% to USD 33.6 bn.

In Apr-Oct period, exports declined 19.02% to USD 150.14 bn, while imports declined 36.28% to USD 182.29 bn. Trade deficit moderated to USD 32.15 bn.

FII’S nett bought Rs 30790 Cr of Indian Equities in Oct . FII’S nett bought Rs 2061 Cr of Indian debt securities in Oct . In this financial year, FII’S have nett bought Rs 127268 Cr of Equities and have sold Rs  28971 Cr in debt. In FY 19-20, FII’s have sold Rs 10200 Cr of Equities and 47393 cr of debt.

Despite a slew of positives and economic momentum with strong inflows, Rupee continued to show signs of weakness. Perhaps, expanding fiscal deficit and unrelenting inflation have outweighed flows and economic positives.       

Global developments:Global Equities maintained solid upside momentun on reports of early administration of corona vaccine. However, US and Europe continued to report record cases  and hospitalisations. US election has given a divided outcome and US President is still refusing to accept the verdict. US data on inflation, retail sales along with political developments and corona cases will be the focus in coming week. Brexit is another issue.

Important developments in coming week: US retail sales

Currency range forecast: USDINR:73.80(support)-74.90/75.30(Resistance), EURINR: 87.40(support), GBPINR: 97/96(support), JPYINR: 70-72.

Suggestion: Cover USD import payables on decline to 73.95. USD receivables can be hedged later+.EURINR payables can be hedged on decline to 87.45. GBPINR receivables hedging can be done on rally to 99levels.

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