Currency Map:

USD/INR 73.48 73.50  
EUR/INR 86.52 87.12 -0.68
GBP/INR 101.38 101.49 -0.10
JPY/INR 66.89 66.94  

Brent Crude closed at USD 75.30 VS prior week close of USD 73.25. Gold closed at USD 1753.Nifty closed at 17585 vs prior week close of 17369. 10 Year G-SEC Yield closed at 6.18%.

Major developments: USDINR traded in the 73.33-73.74 range and closed at 73.48 as against prior week close of 73.50. Rupee closed flat w/w. EUR declined 0.68% and GBP declined 0.10% w/w against Rupee. Indian benchmark Equity index climbed 1.24% w/w. 10 Year G-SEC Yield closed at 6.18%. 1 year fwd premia is at 4.35% p.a. FX reserves stands at USD 641.13 bn.

USDINR had a subdued trading range with no clear direction. IPO inflows are expected to support Rupee. However RBI’S possible intervention can keep the pair range bound. US FOMC meeting and its impact on major pairs will be another determinant. If EUR/USD breaks below 1.1660, it may trigger Rupee weakness and an upside break of 73.85 could weaken Rupee past 74.50.

The week was dominated by Govt announcements for Auto, telecom and banking sector. Indian Govt announced PLI scheme for auto, auto components and drone manufacturing. PLI scheme is around Rs 25938 Cr and aimed at incentivizing high value and high tech automotive technology. Govt expects Rs 42500 Cr of investment over 5 years with 7.5lacs job creation. FDI in telecom was increased to 100% and spectrum sharing, surrendering have been permitted. Telecom companies’ spectrum payment has been given moratorium of 4 years. The moratorium comes with a Marginal Cost of Funds based Lending Rate (MCLR) + 2 percent, making it revenue-neutral for the government. Govt also announced spectrum auction calendar and the tenure of spectrum has been increased to 30 years.

Union Cabinet approved a government guarantee of up to Rs 30,600 crore for security receipts to be issued by National Asset Reconstruction Company Ltd (NARCL). NARCL will buy non performing assets from banks. Govt is also setting up Indian debt resolution company to manage NPA’S. The government guarantee effectively offers to pay the difference between the face value and realised value of the security receipts issued by NARCL. FM said that in the last six financial years, banks have recovered Rs 5,01,479 crore. Of this Rs 3.1 lakh crore have been recovered since March 2018. 

On data releases, Indian CPI declined to 5.3% in Aug from 5.9% in July. Food inflation moderated to 3.11%. IIP climbed 11.5% in July. Manufacturing grew by 10.5% in July. The mining sector output rose 19.5 per cent in July while power generation increased 11.1 per cent.

Indian Exports climbed 45.8% in August to touch USD 33.28 bn. Imports climbed to USD 47.09 bn. Trade deficit was higher at USD 13.81 bn. Exports in Apr-Aug period stands at USD 164.2 bn.

In Sept, FII’S have net bought Rs 5300 cr in Equity segment and have net bought Rs 2255 cr of debt. In this financial year, FII’S have net bought Rs 2925 Cr worth of Indian Equities and have bought Rs 10120 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.

Global developments: US retail sales showed resilience even as Corona spread worsened in some states. CPI slowed, supporting Fed’s view that inflation could be transitory. Fed is meeting this week against the above back drop. Fed may announce a timeline for slowing down asset purchases, but emphasise that monetary policy will remain soft. Economic projections, inflationary trend and employment scenario will be explained in Fed press conference.

USD continued to exhibit strength ahead of FOMC meeting.

Currency range forecast: USDINR: 73.30(support)-73.85(Resistance), EURINR: 86.35(support), 87.25(Resistance), GBPINR: 100.40.(support), 102.25- Resistance, JPYINR: 66-68.50.                         

Suggestion: Cover USD import payables on dips to 73.30/731.5. Receivables can be covered on spike to 73.60/73.72. 

EURINR receivables can be hedged closer to 87+. GBPINR receivables hedging can be done at around 102.
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