Daily Market Commentary: Tuesday, September 25, 2012

Domestic and International Highlights:

 

The Indian rupee opened at 53.38 levels after closing yesterday at 53.47 levels. The intraday range for the rupee is seen between 53.15-53.70 levels.

 

The Asian markets are seen swinging between gains and losses on account of weaker German business confidence. The German Ifo institute's monthly business sentiment index fell for a fifth successive month in September to its lowest level since early 2010, with the outlook component touching its worst level since May 2009. The uncertainty about the bailout prospect for Greece and Spain are also making the investors worried.

 

The Spain seems to be under renewed pressure from markets, and risks a downgrade of its sovereign debt rating to junk status by ratings agency Moody's, which is expected to announce its review soon. It also faces a 27.5 billion Euro refinancing at the end of October. Spain has not made clear whether or not it would seek an external bailout and is not expected before 21st October.

 

The International Monetary Fund's Managing Director Christine Lagarde said on Monday that the IMF would cut its forecast for global growth when it meets on 12-14th October in Tokyo.

 

The global markets have welcomed the additional stimulus from the U.S. Federal Reserve, Bank of Japan and European Central Bank's move aimed at easing the burden of heavily indebted euro zone states seeking aid. The Deputy finance ministers and central bankers of the Group of 20 wealthy and leading emerging nations agreed that central bank stimulus was not enough to fix the ailing global economy, and governments must increase their efforts to boost growth.

 

The demand for Safe-haven assets rose on Monday, pushing U.S. Treasury yields lower. The dollar index also rose to a 1-1/2 week high of 79.765 levels on Monday. The US treasury yield is currently trading at 1.72%. The Indian 10-year bond yield ended flat on Monday. The 10-year bond yield closed steady at 8.16 percent, after falling to 8.15 percent during the day, its lowest since 10 Aug.

 

The Liquidity was not too impacted even after the cut in the cash reserve ratio which released 170 billion rupees ($3.18 billion) into the banking system on Saturday given that the repo borrowings from the central bank window rose to 801.3 billion rupees on Monday at the start of a new reporting cycle.

 

Outlook: Rupee still maintains a very strong medium term support at 53.10-53.50 levels. Importers still maintain buying on dips completely for Sep and PARTIALLY for Oct months close to 53.10- 53.50 levels. Next stop loss for importers at higher side will be 53.85 levels, if breaks concrete covers need to be taken immediately. Very short term exporters can look at covering in any weakness. 1-2 months exporters wait for better levels.

 

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