Daily Market Report: Tuesday- October 9, 2012

The Indian rupee opened at 52.35 levels after closing yesterday 52.64 levels. The intra day range for the rupee is seen between 52.20-52.60 levels. The Asian shares rose on Tuesday but gains were capped on back of concerns over global growth prospects. The International Monetary Fund cut its global growth forecast on Tuesday to a 3.3 percent expansion for 2012, down from its July estimate of 3.5 percent, making it the slowest year of growth since 2009.

The IMF also said on Tuesday that China's economic growth is expected to weaken to 7.8% this year, warning of risks to emerging Asia on account of on-going Euro Crisis and fiscal cliff problem in US. While India, Asia's third-largest economy, is expected to grow 4.9% this year, down from a forecast in July of 6.1% and 6% growth next year, as compared to an earlier 6.5% projection.

The Euro Finance Minister launched the ESM (European Stability Mechanism) region's permanent rescue fund yesterday. The European Finance Ministers will be discussing Spanish and Greek finances in Luxembourg today. The EU President also stated that Spain does not need a bailout to meet its financial needs.

A decision about releasing the next aid payment to Greece was also put off as the Troika continues negotiations with Greek officials. The Prime Minister warned last week that the country's coffers will be empty if international aid isn't received by the end of November.

The US 10 year treasury dropped down to 1.70% from 1.74%. The Dollar Index was seen rebounding to 79.70 levels. The economic challenges in Spain and Greece will continue to build pressure over the euro and continue to drive the volatility in the global markets.

Outlook: Dollar made a strong recovery making a high of 52.64. It seems there has been a significant buying from importers below 52 and profit booking in equities on global concerns. It will be safe to conclude that rupee has made a temporary bottom at 51.37 provided it stays above 51.80 on a continuous basis. Exporters may sell above 52.40 for long term only with good premiums. This strategy will protect you from any immediate reversal or short term rupee weakness which we just saw yesterday. Importers had been asked to cover on break of 52 levels yesterday for the month of October. Target 53.05

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