WEEKLY SYNOPSIS: 14/05/2021

Currency Map:

Brent Crude closed at USD 68.80 VS prior week close of USD 68.60. Gold closed at USD 1843.Nifty closed at 14677 vs prior week close of 14823. 10 Year G-SEC Yield closed at 6.02%.

Major developments: USDINR traded in the 73.22-73.54 range and closed at 73.29 as against prior week close of 73.51. Rupee gained 0.29% w/w. EUR closed flat and GBP climbed 0.59% w/w against Rupee. Indian benchmark Equity index declined 0.98% w/w. 10 Year G-SEC Yield closed at 6.02%. In May till date, FII’S have net sold Rs 8713 cr in Equity segment and have net bought Rs 1756 cr of debt. In this financial year, FII’S have net bought Rs 802 Cr worth of Indian Equities and have bought Rs 655 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 gained more than expected even as there is general consensus for Rupee decline. Rupee has recovered Rs 2 since it hit 75.33 on 22 nd April. USDINR fwd premia again climbed higher to 5.15%. Indian Equity indices declined on Global inflation fears and corona infection impact.

On data front, Indian April CPI inflation eased to 4.29%. March inflation was at 5.52%. Inflation in the food basket was 2.02 per cent in April, down from 4.87 per cent in the preceding month. March IIP climbed to 22.4% due to low base effect. Manufacturing output climbed 25.8%. Mining output climbed 6.1 per cent and power generation increased by 22.5 per cent in March. IIP contracted 3.6% in Feb 2021. IIP declined 8.6% in FY21.

Technically, USDINR has to clear 73.55 to negate its recent downward move.

Global developments: US inflation surged, kindling debate on whether this will be sustained or transitory. US retail sales was flat. Fed officials reassured that tapering of QE is far off and it would prefer to see sustained inflation above its average target to revise its opinion. Global Equities had roller coaster ride last week. Markets recovered on Friday.

USD fell again on Friday after trying to stage a comeback for 2 days. Focus is now on FOMC minutes.

Currency range forecast: USDINR:73.10(support)-73.80(Resistance), EURINR: 88.75(support), 90.75 (Resistance), GBPINR: 102(support), 103.75- Resistance, JPYINR: 66-68.50.                         

Suggestion: Cover USD import payables. USD receivables can be hedged on rally. EURINR payables can be hedged now. GBPINR receivables hedging can be done at around 105.

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