Currency Map:

USD/INR 73.24 73.12 0.16
EUR/INR 89.60 88.74 0.96
GBP/INR 99.45 99.96 -0.52
JPY/INR 70.52 70.71 -0.26

Brent Crude closed at USD 56.22 VS prior week close of USD 51.70. Gold closed at USD 1848.Nifty closed at 14347 vs prior week close of 14018. 10 Year G-SEC Yield closed at 5.89%.

Major developments: USDINR traded in the 72.90-73.46 range and closed at 73.24 as against prior week close of 73.12, nominal Rupee decline of 0.16% w/w. EUR climbed 0.96% and GBP declined 0.52% against Rupee. Indian benchmark Equity index gained 2.4% w/w. 10 Year G-SEC Yield closed at 5.89%.

Rupee gained to 72.90 early last week, tracking USD losses. However, there was a reversal in strength and Rupee fell to 73.46, before closing the week at 73.24. Increasing trade deficit due to economic recovery, higher Crude oil prices are pitted against robust inflows. Equity indices gained further last week as Q3 corporate results are expected to be better than consensus. IT major TCS reported the best performance Quarterly result in last 3 years.

Indian GDP is expected to contract by -7.5% in this fiscal as per first advance estimates released by the Govt. The movement of various high-frequency indicators in recent months, points towards broad-based nature of resurgence of economic activity. The relatively more manageable pandemic situation in the country as compared to advanced nations has further added momentum to the economic recovery,” the government said in a press release. However, GDP for 2021-22 is expected to be between 9- 11%, due to base effect and economic recovery momentum. Budget is on Feb 1 st and will be a major focus considering the pandemic effect and promise of a path breaking budget.

Indian trade deficit in December widened to $15.71 billion, as imports grew by 7.6 per cent to $42.6 billion, and exports declined 0.8% to USD 26.89 bn.

In April-December 2020-21, the country’s merchandise exports contracted by 15.8 per cent to $200.55 billion, as compared to $238.27 billion in the same period of 2019-20. Imports during the nine months of the current fiscal declined by 29.08 per cent to $258.29 billion, as against $364.18 billion in April-December 2019-20.

Indian PMI(mfrg) for Dec ended at a robust reading of 56.4. IIP and CPI are to be released early next week.

FII’S nett bought Rs 4202 Cr of Indian Equities in Jan . FII’S nett bought Rs 45 Cr of Indian debt securities in Jan . In this financial year, FII’S have nett bought Rs 215995 Cr of Equities and have sold Rs  21744 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt.

Global developments:

Important developments in coming week:  Equity and Currency markets shrugged off US political chaos and focused on expansion of US fiscal stimulus under new President. Surging US yields helped USD to recover against crosses. Gold declined and Crude climbed steeply. Global equity investors continue to be in risk seeking mode, ignoring the pandemic effect on health and economy. Asian and European indices joined US and surged to multi decade and record highs. Market is pinning its hope the positive effect of vaccination and increased Govt spending.

US data was mixed. While ISM (mfrg and non mfrg) was better than expected, employment data was below consensus. US non-farm payroll employment contracted -140k in December, well below expectation. Unemployment rate was unchanged at 6.7%.

The EU economy contracted for a second successive month in December, deteriorating at a slightly faster rate than previously thought at the end of the year due to intensifying COVID-19 restriction. UK and many EU counties ordered lock downs to stem the surging infection even as vaccination efforts intensified.

Focus is on US retail sales and CPI.

Technically,US could rebound as momentum of fall is waning.

Currency range forecast: USDINR:72.90(support)-73.55(Resistance), EURINR: 88.80(support), 90.70 (Resistance), GBPINR: 97(support) 100.20/101.20- Resistance, JPYINR: 70-72.                         

Suggestion: Cover USD import payables on decline to 73.05/72.90. USD receivables can be hedged at 73.75. EURINR payables can be hedged on decline to 88.80. GBPINR receivables hedging can be done.

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