Currency Map:

Brent Crude closed at USD 106 VS prior week close of USD 106. Gold closed at USD 1897.Nifty closed at 17102 vs prior week close of 17171. 10 Year G-SEC Yield closed at 7.14%.

Major developments: USDINR traded in the 76.29-76.77 range last week and closed at 76.43 as against prior week close of 76.48. Rupee gained 0.06% w/w. Rupee declined 0.85% m/m. March close was 75.78. EUR declined 2.65% w/w and GBP declined 3.61% w/w against Rupee. Indian benchmark Equity index declined 0.40% w/w. 10 Year G-SEC Yield closed at 7.14%. 1 year fwd premia is at 3.80% p.a.

Rupee movement was range bound considering USD’S surge against majors. This is remarkable considering USD index’s steep rise, Yuan decline and wobbly Equity indices. FII’S continued to sell in both Equity and debt markets. LIC IPO is scheduled for 4 th May. This could bring in some funds and trigger Rupee gain.

In 2022-23, FII’S have sold 5401 Cr of Equities in April till date and have sold Rs 1193 Cr of debt in April, till date. In 2021-22, FII’S net sold Rs 128897 cr in Equity segment and have net bought Rs 4805 cr of 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: Last week, volatility was high as markets digested news that China may enter into more lockdowns, worried that inflation will continue to rise, and saw negative US Q1 GDP and earnings surprises.  This week the volatility is likely to continue as central banks and jobs reports from around the globe will make headlines.

Dollar index surged to as high as 103.92 last week, hitting the highest level since 2002. US Equity indices declined steeply, following disappointing results from some leading tech companies. Chinese Yuan declined 5% m/m as China is grappling with Covid cases. Lock downs in Shanghai and Beijing are bound to drag GDP down and cause further supply disruptions.

US real GDP contracted by 1.4% quarter-over-quarter (q/q) in the first quarter of 2022 – a significant slowdown from Q4’s 6.9% (annualized). Growth was pulled lower by a sharp widening in the trade deficit and a pullback in inventory investment, shaving a combined 4pp from headline growth. Subtracting from this, domestic demand expanded by a healthy 2.6%, a big improvement from its 1.5% pace in the second half of 2021.

US headline PCE price index accelerated from 6.3% yoy to 6.6% yoy, above expectation of 6.5% yoy.

German economy ministry has cut 2022 GDP growth forecast to 2.2%, down from January’s projection of 3.6%. Nevertheless, 2023 GDP growth forecast is upgraded slightly from 2.3% to 2.5%. It expects Russia’s invasion of Ukraine, resulted sanctions and higher energy prices will weigh on output.

Eurozone CPI ticked up from 7.4% yoy to 7.5% yoy in April, matched expectations. CPI core rose from 2.9% yoy to 3.5% yoy, above expectation of 3.1% yoy. Eurozone GDP grew 0.2% qoq in Q1, slightly below expectation of 0.3% qoq. Compared with the same quarter a year ago, Eurozone GDP grew 5.0% yoy.

FOMC is expected to raise rates by 50bps when it meets this week, thereby increasing the Fed Funds rate from 0.5% to 1.0%. BOE is expected to raise rates by 25 bps.

US non farm payrolls data and Company earnings will remain in focus this week, besides Central bank meetings. Last week, markets saw negative earnings surprises from AMZN and GOOGL.  In addition, there were downward revision to forecasts from AMZN and AAPL due to the lockdowns in China. Nasdaq declined 13% m/m. US S&P 500 declined 8.9% m/m.

Currency range : USDINR: 76.10/75.70( support), 76.75 (resistance), EURINR:80.40/78.75 (support)/ 81.50/82.40 (Resistance), GBP/INR: 94.60-97.50, JPY/INR:.56-61

Suggestions: USD exports can be covered on rally till 76.50/76.70.EURINR payables can be covered at 80.40/78.60. Receivables can be hedged at 82.40. GBPINR exports can be covered at 97.50+.

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