Daily Market Commentary : Friday August 31, 2012

Domestic and International Highlights:

The Indian Rupee opened weaker at 55.75 levels against the dollar. Yesterday rupee was seen closing firm at 55.63 levels against the dollar. The Intraday range for the rupee is expected between 55.55-55.90 levels.

 

The Asian peers are trading lower as reports on industrial output in South Korea and Japan add to signs of slowing economic growth and on speculation Europe's debt crisis is worsening with no concrete plans on table. The lowering of expectations that U.S. Federal Reserve Chairman Ben Bernanke will offer any signal of a further monetary stimulus is also making the riskier assets to trade lower.

 

The market would be keenly awaiting the important GDP numbers for the April-June quarter, which is due for the day. The market expects that the number will be around 5.3%.

 

The corporates are still keeping hopes on the government to revive the investment cycle which will help support growth. The concern is that the household savings for FY12 net financial savings fell to 7.8% of GDP the lowest in 22 years impacting the investment cycle further.

 

The market is expecting that lower growth figures may force the RBI to cut rates. But it seems unlikely since the RBI is still concerned with the inflation.

 

The US 10 year treasury yield is trading stable at 1.63%. The Indian 10 year bond yields edged up on Thursday for a second straight session on caution ahead of economic growth data and expectation that RBI will reduce interest rate on 17th Septembers 'monetary policy review. The benchmark 10-year bond yield closed up 1 bps at 8.19%.

 

Outlook: The Indian Rupee is in a range of 55 - 56 levels with a weaker bias. Exporters still maintain covers near 55.80-56.00 levels as suggested and importers near 55.20-55.40 levels. The pair still stays bullish targeting 56.00 levels. Breaking of 56.20 in USD/INR will be quite bullish for the pair again. (It is to be noted that rupee did not appreciate in the same manner as dollar weakened against the euro and pound internationally signaling extra weakness in rupee.)

 

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