Daily Market Report: Monday - November 19, 2012

The Indian Rupee opened at 55.06 levels after closing at 55.17 levels. The Intraday range for the rupee is seen between 54.85-55.15 levels.

The Indian Rupee fell to two month lows at 55.22 levels last week as October 2012 trade deficit rose to fiscal year highs on the back of negative export growth. The failure of the 2G spectrum auction in India where the government raised only Rs 9400 crores against a budgeted amount of Rs 40,000 crores has given rise to worries on the higher fiscal deficit.
The Amendments to GAAR have been finalized, finance minister P Chidambaram disclosed on Sunday. Any positive announcement on it could help the Indian markets for a while.

The Asian equity markets are trading higher, boosted by the positive tone in U.S as President Barack Obama expressed confidence that he and Congress would reach a budget agreement. While the yen fell to a near seven-month low against the dollar on expectations a new government after next month's election in Japan may deliver more stimulus.
The weaker Yen can help world stocks gain on fresh Yen carry trades adding to strength in the dollar index.

The Eurozone data remains weak with third quarter GDP growth at negative 0.1% indicating recession for the Euro area countries. The weak Euro zone economy will hurt global growth as it is a strong export market for China and Japan.
The U.S. Treasury yields fell to their lowest levels in over two months on Friday and is trading at 1.59%. The Indian ten year benchmark bond yield closing down 2bps week on week on the back of lower inflation numbers.

The bond market is hopeful of RBI cutting rates on 18th December 2012 policy review on the back of growth and inflation data. However RBI officials including the RBI Governor are non committal on rate cuts in December. Liquidity as measured by the bids for repo in the LAF (Liquidity Adjustment Facility) auction of the RBI tightened last week. The bids for repo averaged Rs 108,000 crores on a daily basis last week against an average of Rs 67,000 crores seen in the week previous to last.

Outlook: Exporters sell close to 55 at least 40-50% for next 2 months and partially for longer term (8-12 months only). The rupee is still expected to be weak with some dips in between. Uncovered Importers are still recommended to cover on dips close to 54.50 Overall USD/INR pair remains in a bullish trend.

(Source: Corporate Communications Team, India Forex Advisors Pvt. Ltd.)