Currency Map:

USD/INR 74.35 74.74 -0.52
EUR/INR 89.06 88.89 0.19
GBP/INR 102.46 102.40  
JPY/INR 68.33 68.15 0.26

Brent Crude closed at USD 63.08 VS prior week close of USD 63.10. Gold closed at USD 1776.Nifty closed at 14617 vs prior week close of 14834. 10 Year G-SEC Yield closed at 6.08%.

Major developments: USDINR traded in the 74.28-75.33 range and closed at 74.35 as against prior week close of 74.74. Rupee gained 0.52% w/w. EUR climbed 0.19% and GBP closed flat against Rupee. Indian benchmark Equity index declined 1.46% w/w. 10 Year G-SEC Yield closed at 6.08%. In April till date, FII’S have sold Rs 1653 Cr worth of Indian Equities and have sold Rs 2656 Cr worth of Indian 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.

Rupee wobbled, tracking 10 Year G-SEC movement. RBI’S dovish policy and 1 lac Cr bond purchase triggered Rupee’s decline to 75.33. However higher inflation data supported yields at 6% and even pushed 10 Year yield to 6.18% on Friday. Rupee recovered on spike in yield and also due to RBI’S intervention. RBI sold USD above 75. Rising infections and regional lock downs are weighing down on Rupee and Equity markets.

Economic data was also disappointing. March CPI climbed 5.52% as against 5.03% in Feb. Core inflation climbed to 6.09% from 5.6%. Average inflation for last fiscal stood at 6.2%. IIP Contracted -3.6% in Feb. Indian WPI inflation climbed steeply to 7.39% in March, up from 4.17% in Feb. 10 Year G-SEC yield spiked to 6.17%. However, it retraced back to 6.08% at close.

USDINR is expected to trade in 73.80-75.50 range for some more time. Rupee’s decline and subsequent rise will depend on infection path. If infection peaks in May, Rupee decline could get halted in May/June.

Global developments: US and Europe reported better than expected economic data on reopening of economies, control of infection and progress in vaccination. However, Geo political tensions between US and Russia and US and China resurfaced. US and Russia imposed sanctions on each other.                                          

Focus is on ECB meeting. ECB is expected to leave monetary policy unchanged as Europe continues to fight its way through the recent lockdowns due to the coronavirus. 

Global Equities were helped by strong earnings and better than expected economic data. 

US retail sales was stronger than expected due to vaccinations, pay checks and easing of restrictions. US CPI also climbed higher. Fed beige book noted that “US national activity accelerated to a moderate pace from late February to early April,” with the leisure and hospitality industry especially boosted by rising demand for travel. 

Euro/USD moved closer to 1.20. It has rallied from 1.17. This is also linked to recent pause in US Yields. Gold climbed swiftly to USD 1776. Crude prices also climbed on economic optimism.

Currency range forecast: USDINR:73.80(support)-75.50(Resistance), EURINR: 87.15/85.25(support), 89.75 (Resistance), GBPINR: 100.30/99.30(support), 103.50- Resistance, JPYINR: 66-68.75.                         

Suggestion: Cover USD import payables on decline to 73.80. USD receivables can be hedged at 74.90/75.50. EURINR receivables can be hedged on rally to 89+. GBPINR receivables hedging can be done at around 103.50.

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