Daily Market Report: Monday - December 10, 2012

The Indian rupee opened at 54.30 levels after closing at 54.46 levels on Friday. The Intraday range for the rupee is expected between 54.20-54.60levels. The Indian Rupee was largely unchanged week on week despite the government won a crucial vote on retail FDI in the parliament.

The positive sentiments on the retail FDI vote is expected to be carried on if the government pushes through reform proposals like allowing foreign direct investment in the pension sector and raising the limit for insurance. The Indian trade data for the month of November is due for the day.

The RBI indicated that India's inflation will come off in 2013 period leading to hopes of rate cuts. Before that IIP and WPI figures would be keenly watched to confirm the rate cut in the new year. The IIP data is set to release on 12th December while WPI on 14th December.

The Asian markets are trading higher today as after China's factory output and retail sales topped forecasts and the U.S. unemployment rate unexpectedly fell. The China's industrial production climbed 10.1% in November from a year earlier and retail sales growth accelerated to 14.9%, while inflation was 2% the statistics bureau said yesterday.
The Euro is seen under pressure, on account speculation over recession in Germany and political uncertainty in Italy after

Prime Minister Mario Monti said at the weekend he intended to resign early. The Euro was seen weakening to a nine-day low against the dollar on Friday after the Bundesbank slashed its growth outlook for Germany.

The US employment report for November 2012 came in positive with the economy adding 146,000 jobs against expectations of 85,000 jobs. The unemployment rate in the US dropped to 7.7% in November against levels of 7.9% seen in October 2012. US economy adding jobs is positive for markets though the biggest driver for markets will come from the development on the "Fiscal Cliff" front.

The Liquidity as measured by the bids for repair in the LAF (Liquidity Adjustment Facility) auction of the RBI eased last week on the back of RBI bond purchases. Bids for repo averaged Rs 93,000 crores on a daily basis last week against an average of Rs 102,000 crores seen in the week previous to last. Liquidity is likely to ease further on the back of RBI bond purchase auctions.

Outlook: Exporters were already asked to cover around 55.50 levels for next 2-3 months 50%. The 54.10 is seen as a very crucial support, and rupee is seen holding above it. The breakout below 54.10 levels and rupee sustaining below it for few sessions, would confirm further appreciation to around 53.50 levels. Importer to use a strict stop loss of 54.55 to cover the unheged exposures. Overall USD INR bullish.

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