Daily Market Report: Wednesday - December 5, 2012

The Indian Rupee opened at 54.59 levels after closing yesterday at 54.68 levels. The Intraday range for the rupee is seen between 54.40 -54.85 levels.

The government's stumbling economic reform program faces a key parliamentary test today as the parliament sets to vote on FDI in retail. The investors would be keenly eyeing the session. The Indian Service PMI data is also due for the day.

The news that the government agreed to a non-binding vote helped Indian rupee to gain against the dollar. But, if things go reverse of the expectation then we can see rupee erasing its earlier gains. The FII's have bought more than $20 billion worth of domestic shares so far this year and bought debt worth more than $6 billion in the local market.

The Asian markets were trading lower after Australia's economic growth slowed and as President Barack Obama held his ground on raising tax rates, bringing the U.S. budget talks into a stalemate. The concern continues over whether the United States can avert an economic slump as lawmakers struggle to break a budget impasse by year end.
The Greek plan to buy back debt pushed the Euro to a seven-week high of $1.3109 on Tuesday. Despite the uncertainty, markets hope U.S. lawmakers will eventually reach a budget compromise, but the White House and Congress have yet to agree on a long-term deficit reduction plan.

The Indian 10-year benchmark bond yield ended flat at 8.17%. The Reserve Bank of India bought 116.42 billion rupees ($2.13 billion) of government bonds through open market operations on Tuesday, marginally lower than the notified 120 billion rupees. The Call money closed at 8.05/8.10% compared with Monday's close of 8.00/8.05%.
Outlook: Exporters were already asked to cover around 55.50 levels for next 2-3 months. The Importers should look to cover below 54.50 levels. The importer should cover 30% -50% for Dec, Jan & Feb. The market is correcting, opportunities should be taken by importers to cover the un hedged exposure. Overall USDINR bullish.

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