Currency Map:

USD/INR 74.56 74.65  -0.12
EUR/INR 88.14 88.28 -0.15
GBP/INR 103.10 102.75  0.34
JPY/INR 67.75 67.79  

Brent Crude closed at USD 73.15 VS prior week close of USD 76.10. Gold closed at USD 1806.Nifty closed at 15923 vs prior week close of 15689. 10 Year G-SEC Yield closed at 6.13%.

Major developments: USDINR traded in the 74.41-74.67 range and closed at 74.56 as against prior week close of 74.65. Rupee gained 0.12% w/w. EUR declined 0.15% and GBP climbed 0.34% w/w against Rupee. Indian benchmark Equity index climbed 1.4% w/w. 10 Year G-SEC Yield closed at 6.13%. 1 year fwd premia is at 4.45% p.a. In July, FII’S have net sold Rs 3394 cr in Equity segment and have net bought Rs 605 cr of debt. In this financial year, FII’S have net bought Rs 5657 Cr worth of Indian Equities and have sold Rs 3530 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 trading was subdued. Despite IPO inflows, Rupee gains stalled at around 74.40. Fwd premia was steady in the 4.40-4.45% p.a. range for 1 year.  Indian Equity indices climbed, and closed 1.4% higher on w/w basis. Crude softened w/w, providing some relief.

CPI climbed 6.29% in June. Food inflation inched higher to 5.15%. IIP climbed 29.3% y/y in May.

USDINR could trade in the 73.90-75 range. Since Rupee has declined steeply in the last 1 month, expect correction to 73.90. However, it has to break 74.40 to pick steam for a climb to 73.90. Upside break of 74.67 could trigger fresh wave of Rupee selling targeting 75.

Global developments: Focus was on US data and Fed members comments. Fed Chairman Powell reiterated in prepared congressional testimony that inflation will remain anchored around the Fed’s 2% target and the U.S. economy was “still a ways off” from levels the Fed wanted to see before tapering its stimulus support. USD declined on this report.

US CPI inflation jumped to 5.4% y/y as against consensus of 4.9%. Annual Core CPI, which excludes volatile food and energy prices, rose to 4.5% from 3.8%, surpassing analysts’ estimate of 4%. USD gained on this development. US retail sales rose 0.6% mom to USD 621.3B in June, much better than expectation of -0.6% mom decline. Ex-auto sales rose 1.3% mom, above expectation of 0.4% mom. Focus is on ECB meet in the coming week.

BOJ maintained status quo on monetary policy.

Though most Countries have reopened economy fully, Covid’s Delta Variant remains a matter of concern. The hope is that severity will be less due to vaccination.

ECB meeting is the major focus event for this week.

Currency range forecast: USDINR:74.40/73.90 (support)-74.90(Resistance), EURINR: 87.50(support), 89/89.50(Resistance), GBPINR: 102(support), 104- Resistance, JPYINR: 66.50-69.                         

Suggestion: Cover USD import payables on dips to 73.90. EURINR receivables can be hedged closer to 88.50/89. GBPINR receivables hedging can be done at around 103.50.

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