Daily Market Commentary: Monday, September 17, 2012

Domestic and International Highlights:

 

The Indian rupee closed the last week on a stronger note and it was trading near its two and a half month high against the US dollar after the Fed announced the monetary easing for boosting the economic growth. Today the rupee opened at 53.80 levels and the intra day range for the rupee is seen between 53.60-54.00 levels.

 

While Indian citizens were trying to cope up with the Diesel price hike, the government relaxed foreign direct investment (FDI) in aviation, multi-brand retail, power exchanges and broadcast services. It did not stop here, but further allowed the disinvestment of five Public Sector Units (PSUs), including Oil India , Nalco, Hindustan Copper and MMTC.

 

It has announced 51% FDI in multi brand retail sector and the FDI cap on broadcast services has been raised to up to 74%. Through disinvestment, the government aims to raise Rs. 15000 crores in the current fiscal year ending March 2013.

 

Giving justification for these actions, the Prime Minister said it was a step which the country needed badly and he also expressed the hope that the economy would rebound in the second half of the current fiscal. However, the other political parties are opposing these steps saying this will not stimulate the economy rather it will have an adverse effect on small traders.

 

In the last week, we saw loads of events and news coming out from the economies like the US and Europe in the form of FOMC meet and the German court ruling. And the major currencies are still witnessing the repercussions, as the US dollar is trading below its 6 months low against its majors. The Euro is trading above its 4 month high against the US dollar.

 

On the domestic front, the market will be keenly waiting today for the mid quarter review of RBI. Last week we saw IIP coming out just 0.1% and the inflation for the month of August remained sticky above the 7% level, which suggests that the central bank might not make any changes in the policy rates. The RBI officials have been repeatedly saying that inflation remains a concern for them.

 

Outlook: The Indian Rupee has broken the range of 55-56 finally. The news of QE3 and positive local factors has made Rupee bullish at least in the short term but the medium term outlook still remains bearish. Please note rupee has important medium term support at 53.01 levels (50% retracement of the rise from 48.60-57.33). Importers hold as of now with a STRICT stop loss of 54.10 to initiate buys. We have covered most exporters for longer term before QE3 , also discuss with respective Relationship managers.

 

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