Currency Map:

USD/INR 75.37 74.69 -0.91
EUR/INR 85.74 85.61 0.15
GBP/INR 101.89 101.55 0.33
JPY/INR 64.91 64.99 -0.12

Brent Crude closed at USD 95 VS prior week close of USD 92.80. Gold closed at USD 1860.Nifty closed at 17374 vs prior week close of 17516. 10 Year G-SEC Yield closed at 6.69%.

Major developments: USDINR traded in the 74.57-75.42 range and closed at 75.37 as against prior week close of 74.69. Rupee declined 0.91% w/w. EUR climbed 0.15% and GBP gained 0.33% w/w against Rupee. Indian benchmark Equity index declined 0.81% w/w. 10 Year G-SEC Yield closed at 6.69%. 1 year fwd premia is at 3.89% p.a.

Rupee was jolted by US Fed member’s remark on aggressive rate hikes to combat spiralling inflation in US. Crude also rallied steeply. However, RBI’S dovish stance brought fwd premia down and softened the USDINR fwd rates. Though Spot declined 68 ps w/w, fwd premia for 1 year fell 46 ps and the nett effect of Rupee decline is only 22 ps w/w for 1 year.

RBI maintained status quo and added that accommodative policy is warranted to aid growth. GDP is expected to grow by 7.8% in 2022-23 and inflation is expected to gradually decline to 4% next year. CPI is expected to be 5.3% in this fiscal.

Indian Equity markets continued to remain volatile, tracking Global volatility in stocks. Equity markets cheered RBI’S dovish stance. However, it quickly got tagged to Global Equity indices. LIC IPO is expected next month.

USDINR could trade in the 74-76.50 range for this year. In Feb, USDINR could trade in the 75.10-76.10 range.

In Feb, FII’S have net sold Rs 9712 cr in Equity segment and have net bought Rs 5837 cr of debt. In this financial year, FII’S have net sold Rs 42334 Cr worth of Indian Equities and have bought Rs 12345 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: USD regained after initial losses in the week and US Yields jumped sharply as Fed member called for 1% rate hike by July. This is due to CPI climbing to 7.5% y/y, highest since 1982. US CPI rose 0.6% mom in January, above expectation of 0.4% mom. CPI core rose 0.6% mom, above expectation of 0.5% mom. Over the 12-month period, CPI accelerated from 7.0% yoy to 7.5% yoy, above expectation of 7.3% yoy.

US Equities tumbled fearing excessive tightening.  10-Year Treasury touched 2% for the first time since 2019. Gold and Crude also climbed. Russia’s likely invasion of Ukraine is another cause of concern in Oil and financial markets.

Global monetary policy is tightening with major central banks shifting their stance and have delivered notice to hike rates in coming months. Inflation is the biggest issue for many firms as they grapple with higher input costs and wages and shrinking margins.

UK GDP contracted -0.2% mom in December, better than expectation of -0.5% mom. Q4 GDP grew 1.0% qoq.

US retail sales and FOMC minutes are key events in coming week.

Currency range : USDINR: 75.10( support), 75.65/76.10 (resistance), EURINR: 84.75 (support)/ 86.15 (Resistance), GBP/INR: 101-102.50, JPY/INR:63.50-65.50.

Suggestions: USD exports can be covered from 76+. EURINR exports can be covered at around 85.65/86.15+. Payables can be covered at 84.75 and 84.40.  GBPINR exports can be covered at 102.50+

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