Daily Market Report: Tuesday - November 6, 2012

The Indian Rupee opened at 54.70 levels after closing yesterday at 54.50 levels. The Intraday range for the rupee is expected between 54.60-54.90 levels.

The Reserve Bank of India may ease monetary policy as early as January said Governor Duvvuri Subbarao on Monday, as price pressures is expected to ease is in the first part of next year on the back of slower growth.

The government of India will borrow more to fund a fiscal deficit that is now estimated at 5.3% of GDP this fiscal year against the target of 5.1%. The additional borrowing will amount to at least 200 billion rupees. Last month, sluggish tax revenues and higher spending on subsidies such as food, fuel and fertilizer forced the government to revise up the deficit target of 5.3%.

The Asian peers are trading lower, as investors await the results of the US Presidential elections and China's once-in-a-decade leadership change later this week.

The main focus is the U.S. election, and uncertainty ahead of that is going to keep markets nervous.

The bailout deal to keep near-bankrupt Greece afloat is unlikely to be struck next week when Euro zone finance ministers meet in Brussels, a senior EU official said on Monday. The Greek misery strengthens safe-haven bids for German two-year government bond, sending the yields below zero for the first time in two months, while benchmark 10-year U.S. Treasury yields fell to 1.68%.

The Indian benchmark 10-year bond yield off lows at 8.19% from 8.20% on renewed concern that the government may have to borrow more to fund a fiscal deficit.

Outlook: Exporters can sell near 54.80-90 levels only for long term partially (8-12 months only). The rupee is expected to be weak with some dips in between . Uncovered Importers cover on any major dips of 40-50 paisa or anytime costing is met. Overall USD/INR pair bullish as per our expectations.

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