MONTHLY REPORT. USDINR Gone By. 31 st March 2017

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1 USDINR Gone By 31 st March 2017 March remained the month of gains for the Indian currency, which surged to a 17-month high of levels. The huge win for the Prime Minister Narendra Modi-led Bharatiya Janata Party at the state assembly elections, heavy inflows into the Indian financial markets, all contributed to the gaining streak for the currency unit. Rupee started the month at levels, continuing its advance from the previous month and strengthened towards levels initially as the Dollar weakened following the US Federal Reserve Chairperson Janet Yellen s speech which indicated towards an almost certain interest rate hike in the US in March, which made investors book their profits in the American currency. The local currency unit then saw a surge towards levels on huge inflows into the Indian financial markets, both equities as well as the bond markets. Rupee got a slight hit when the world s biggest economy released their ADP employment data which spiked to its highest level since April Losses in the Rupee were however stalled soon with the currency unit advancing towards a high of levels with exit polls indicating a win for BJP in UP and other states. The Indian currency unit witnessed a major spike towards levels as the Bharatiya Janata Party s thumping victory in the Indian states of Uttar Pradesh and Uttarakhand, a personal triumph for Prime Minister Narendra Modi could ensure his party s near domination of politics in India. With the Prime Minister s party registering the biggest-ever victory by any political party in Uttar Pradesh since 1980, Nifty propelled to record highs, thereby helping Rupee to continue its surge. The local currency unit advanced to levels as the sentiment soared on hopes that BJP s stellar show in state polls would pave the way for the Modi Government to focus on key reform measures. The much anticipated turnaround on the economic front opened up a barrage of foreign capital fund flows into India. The American currency also stayed under pressure as the US central bank maintained its stance of a gradual pace of future interest rate hikes. The greenback was also hurt after US President Donald Trump s failure to pass the healthcare bill sparked concerns about his ability to steer economic reforms, damping demand for the currency. Rupee extended gains towards levels on unabated inflows into the domestic debt and equity markets. The Indian debt and equity markets witnessed combined inflows of $8.567 billion in the last month, thereby helping the local currency unit surge to 17-month highs. The local currency unit was also helped as the Dollar weakened against all major currencies. Rupee ended the month at levels.

2 USDINR Outlook Rupee is expected to open the month on a positive note owing to huge inflows into the Indian financial markets on year-end closing. If the local currency unit manages to appreciate significantly above the mark, Rupee could soon see a surge beyond levels as well. However, a slow and steady recovery in the Dollar may make the local currency unit pare a few gains and depreciate towards levels soon. Also, the Reserve Bank of India s monetary policy meet due in the initial few days of the month may also add to the pressure on the local currency unit as the central bank continues to hold interest rates constant, under the change in stance from "accomodative" to "neutral". The RBI may also hold rates constant as the central bank worries about the increasing inflationary conditions in the economy. Although, the central bank is instead expected to come up with a Standing Deposit Facility, in order to suck out the excess liquidity in the foreign exchange markets, thereby giving the central bank more space to intevene and help drive the local currency unit weaker. The Indian currency unit may also come under pressure as the US releases its ADP employment, the non-farm payrolls and the unemployment rate data, as they show an improvement, thereby increasing hopes that the US Federal Reserve hikes interest rates sooner than most market participants have anticipated. In February, the US labour market showed that the US Nonfarm payrolls increased by 235,000 in February and the unemployment rate was 4.7% in the first full month of President Donald Trump s term. The consensus had estimated the Nonfarm payrolls to grow by 190,000 and the unemployment rate to tick down to 4.7%. A weaker Dollar, following US President s Donald Trump s policies and a stability in the crosses may also put the local currency unit under pressure towards levels. The local currency unit may also be hurt with the release of India s retail inflation and wholesale prices data which are expected to see an uptrend. In February, firmer food and fuel prices drove India s overall inflation higher, further dimming any possibility of a cut in interest rates by the Reserve Bank of India amid worries of hardening global commodity prices and expectation of vegetables turning dearer as summer approaches. The Indian Rupee may also be stressed as, with the start of the new financial year, Indian financial markets witness a reversal of inflows which the country witnessed in March. Overall, the Indian currency is expected to trade in the range of and levels.

3 Key Economic Events in January India's February Exports came in at USD bln vs USD bln prior India's February Imports came in at USD bln vs USD bln prior India's February Trade Deficit Data came in at USD 8.90 bln vs USD 9.84 bln India's January Industrial Output stood at 2.70% against the previous of 0.40% India's February WPI Inflation came in at 6.55% against the previous of 5.25% India's February Fuel Inflation stood at 21.02% vs 18.14% prior India's February Food Inflation printed a reading of 2.69% vs 0.56% prior. India's February Manufacturing Inflation printed a reading of 3.66% vs 3.99% prior India's February CPI Inflation came in at 3.65% against the prior of 3.17%

4 USDINR Technical Take Chart 1: USDINR Weekly Chart Rupee has formed a double top on the monthly charts while has broken the neckline of levels. After breaching the neckline support too it has formed a big bearish candle signaling continuation of the downmove. Currently, the pair is well supported at levels (38.2% Fibonacci retracement of the move from to levels). Only a convincing break and close below the same shall possibly open the gateway towards levels (50% retracement + head & shoulder target*, whereby it could take some support. *Double Top target calculation: (top) (neckline) = Rs 2.53 (Distance from top to neckline) Therefore target is = Rs However, any failure to break below levels shall initially prompt a pullback towards and levels. Any further break could see the pair possibly testing levels (technical gap). From these levels, the pair could again resume its downmove and a break below levels shall push it towards levels. Technical indicators like RSI is currently heavily oversold signaling caution on the downmove.

5 S 1 S 2 S 3 S 4 S5 Key Supports Key Resistances R 1 R 2 R 3 R 4 R Strategy Exporters are advised to sell their immediate receipts on upticks towards levels for short term exports. Importers are advised to cover short term exposure on dips towards and lower levels for very near term imports..

6 Markets Round up

7 Graph'o'nomics Indian WPI Trend Indian CPI Trend Indian IIP Trend

8 Graph'o'nomics Indian Forex Reserves Trend FII Trend in Indian Markets US Bond Yields v/s Indian Bond Yields

9 Graph'o'nomics Emerging Market Currencies Russian Ruble Brazilian Real South African Rand

10 Indonesian Rupiah Korean Won Risk Disclosure: Any information presented by Greenback Advisory Services Pvt. Ltd should be in no way understood as an offer, promise or guarantee for receiving a profit or avoiding the losses. Stated here levels of support and resistance must not be construed as an investment advice or endorsement for any financial instrument. There exists no guarantee that the market would behave in accordance with the information stated here Prepared by Greenback Advisory Services Pvt. Ltd.