WEEKLY SYNOPSIS: 26/03/2021
|Currency Pairs||WEEKLY CLOSE||PRIOR WEEK CLOSE||% change|
Brent Crude closed at USD 64.45 VS the prior week close of USD 64.55. Gold closed at USD 1731. Nifty closed at 14507 vs prior week close of 14744. 10 Year G-SEC Yield closed at 6.19%.
Major developments: USDINR traded in the 72.27-72.70 range and closed at 72.52 as against the prior week close of 72.51. Rupee closed flat w/w. EUR and GBP declined against Rupee. Indian benchmark Equity index declined 1.6% w/w. 10 Year G-SEC Yield closed at 6.12%.
The rupee traded both sides of last week’s close. USDINR fwd premia is hovering at around 5.25% p.a. for 1 year. The rupee is gaining despite high crude oil price and USD strength against Euro. US Yield spike is yet to trigger weakness in Rupee. Rupee could decline to 73.05/73.30.
FII’S nett bought Rs 18728 Cr of Indian Equities in Mar (as on 25/3) . FII’S nett sold Rs 6411 Cr of Indian debt securities in March (as on 25/3) . In this financial year, FII’S have nett bought Rs 284583 Cr of Equities and have sold Rs 37035 Cr in debt. In FY 19-20, FII’s sold Rs 10200 Cr of Equities and 47393 cr of debt. FII’S were net sellers in Indian Equities last week.
RBI Governor said that economic growth will be unabated despite rising infections. Fitch upgraded Indian GDP growth for the coming fiscal due to swift recovery. Indian corona infection curve is steepening and could cause supply chain bottlenecks on localized lockdowns.
USDINR is expected to trade in 72.30-73.50 range for some more time. Upside break of 73.50 could herald a fresh wave of Rupee selling. This could happen only if the US yields rally remains unabated.
Global developments: USD was higher against Euro and Pound. US Yields continue to harden and have contributed to USD climb against Yen and Euro. Accelerating GDP and consequently rising prices and expectation of asset purchase tapering will keep US Yields supported. US employment could recover due to fiscal stimulus and rising vaccinations.
Fed Chairman said that 2021 is going to be stronger than previously thought, because of a “combination of better developments” including vaccines and fiscal stimulus. He added: “As we make substantial further progress towards our goals we will gradually roll back” the asset purchase program. He emphasized the “process will take place with the greatest transparency.” And that would only happen “when the economy is all but fully recovered.”
The topic of the week:
Blockage of the Suez canal could affect supply chains temporarily and contribute to inflationary pressures due to higher costs.
EU PMI data showed that manufacturing is vibrant, while the service sector is still reeling under the effects of lockdown. Rising infections in EU and slow vaccination drive are weighing down on EURO.
The focus will be on US nonfarm payrolls and US ISM(mfrg).
Currency range forecast: USDINR:72.30(support)-73.05(
Suggestion: Cover USD import payables on the decline to 72.40. USD receivables can be hedged at 73.05/73.25. EURINR receivables can be hedged on a rally to 86.25/87.50. GBPINR receivables hedging can be done at around 100.80.
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