Report Summary. Expectations of reduction in repo rates by RBI. Uptick in global risk appetite sentiments

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1 Decision enabling cash market analysis & price outlook For the week beginning Oct 01, 2012 USDINR last closing (24 hrs market) Fundamental Summary Report Summary ( 0.52) as on Sep 28, 2012 Price drivers (Indian Rupee) Investor friendly policy measures from Govt. and US dollar inflow into domestic markets Widening of current account deficit due to drift in invisible account inflow. Expectations of reduction in repo rates by RBI Impact on Prices Bearish Uptick in global risk appetite sentiments Technical Summary Price Outlook Summary Price Ranges Strategy Review and Generic Procurement Strategy Turnaround point Infusion of stimulus measures from the overseas central bankers across the board Sum Up Positive bias Price is below 18 pd EMA indicating negative sentiments. RSI (14) seen with negative slope indicating negative bias in the price action. Concisely, USD/INR is likely to consolidate at lower level (INR 52.00) and eventually inch higher towards 18 pd EMA, in the forthcoming few weeks 0 2 weeks 0 1 month 0 2 months IL SL IL SL IL SL Imports Exports Sep import covered at INR Aug export covered at an average of INR % of Oct,12 import Sep export covered at INR covered around INR 50% Oct, 12 export should be covered on the break of INR % of Oct, 12 import should be covered around INR Price sustaining below INR is likely to change the sentiments to negative in the long term.. Discuss with our expert 1 Phone: E mail: services@transgraph.com Internet:

2 Market analysis At overseas markets (Major currencies): US dollar continued its previous week s positive momentum and closed with gains against its major rival currencies as Euro drifted down due to uptick in global risk aversion sentiments after fading away of QE3 hype which was announced on Sept.13. The US dollar was also found support from the ongoing uncertainties at Euro zone and its economic growth. Meanwhile, US economic data too supported risk aversion sentiments as released data numbers painted a bleak economic growth scenario. Below are detail events and data points which unfolded and set the market direction in the previous week and supported US dollar to remain firm. Starting with US economic front,, real gross domestic product the output of goods and services produced by labor and property located in the United States increased at an annual rate of 1.3 % in the second quarter of 2012 (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 %. At US housing data front o S&P Dow Jones Indices for its S&P/Case Shiller Home Price Indices, the leading measure of U.S. home prices, showed average home prices increased by 1.6% for the 20 City Composite in July versus June The positive uptick in the housing prices was mainly due to measures took by FED about stimulus infusion o Sales of new single family houses in August 2012 were at a seasonally adjusted annual rate of 373,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.3 % below the revised July rate of 374,000, but is 27.7 % above the August 2011 estimate of 292,000 Meanwhile, the Conference Board stated that the US Consumer Confidence Index which had declined in August, improved in September. The Index now stands at 70.3 (1985=100), up from 61.3 in August. Meanwhile, the Expectations Index increased to 83.7 from 71.1 and the Present Situation Index rose to 50.2 from 46.5 last month. At other data front, the impact of higher unemployment rate continued to influence the personal spending as household purchases rose meagerly by 0.1% to 0.5% in August against 0.4% in July. While, personal incomes remained flat at around 0.1% in August. In addition, Personal income growth remained flat at 0.1% according to the Bureau of Economic Analysis. 2

3 Looking ahead, it is becoming more clear that recent action taken by the Fed was indeed necessary, but how much QE will the Fed do and for how long?. However, the size, pace, and composition of purchases could be altered down the road and economic data will dictate market expectations for QE3. At European front, annual growth rate of M3 drifted by 2.9 in Aug from 3.6% in July 2012 due to prevailing pessimistic sentiments about economic growth. Meanwhile, while private loan growth rate plummeted by 0.6% in Aug. against 0.4% in July. Meanwhile, EU Commissioner Olli Rehn said that Spain's reform plan "goes even beyond" recommendations "in some areas". The plan focused on spending cuts rather than tax hikes and Budget Minister Montoro said that Spain will meet budget deficit targets this year. Added to this, the disappointment infused into Euro to trade lower after the announcement of Spain bank s stress results. The stress result showed that the Spain s banking sector requires 59.3 billion and the tests which were commissioned by Spain in order to secure funding for ailing banks, assumes the unemployment rate will rise to 27.2 percent and GDP will fall 4.1 percent in 2012, 2.1 percent in 2013 and 0.3 percent in Moving into this week s trading session: US dollar is expected to trade with mixed note by finding cues from economic data releases from US on ISM manufacturing and non manufacturing, US Job market and housing data numbers apart from Euro zone s ECB interest rate meet. In Domestic market (India Rupee Vs US dollar): In Interbank Foreign Exchange market, INR remained on a firm foot against US dollar on the back of more inflow of US dollar into domestic market. The positive momentum of domestic equity markets continued to signal stimulate the risk appetite sentiments and supported INR to remain firm in the previous week. Below were the key data numbers which streamline direction of INR: At Indian front, latest FDI reforms by Indian government in retail, airlines and broadcasting sector supported INR to trade firm against US dollar in the expectation of major inflow of US dollar. The measures to bring down the fiscal deficit also supported INR from the levels of 5.3% to 5.1% of GDP as Govt. was firm on the policy decisions. Meanwhile, FII inflow of US dollar continued in the last week as well into domestic markets as as they bought total equity and debt securities for an worth of US $ 1.8 billion. The implementation of positive measures taken by domestic policy makers followed by liquidity measures by overseas central bankers added positivism to INR positive rally. 3

4 At forex exchange reserve front, the total reserves drifted by US $ 502 million and foreign currency asset were down by US $ 485 million for the week ending Sept.21. Moving we might see uptick in the forex reserve front. Moving into this week s trading session: We expect INR to trade in the range of against US dollar for next couple of weeks. Technical Outlook on USDINR Downside momentum continued in the last week also and USD/INR pair closed at INR down by INR 0.53 in the previous week. Pair is seen below 18 pd EMA indicating negative sentiments; The oscillator RSI(9), is trading towards oversold region and bearish trend being intact continues to indicate lower price possibilities. On the lower side, support is pegged around 52.00, (61.80 % retracement to the previous up move). On sustaining below the same, it could take the price further south towards INR However with RSI moving towards oversold region, some consolidation and possibility of bounce back is possible from the lower levels. On upside, resistance is pegged around INR INR and also 18 pd EMA will cap the further depriciation of INR. Concisely, USD/INR is likely to consolidate at lower level (INR 52.00) and eventually inch higher towards 18 pd EMA, in the forthcoming few weeks. 4

5 Technical Outlook on EURUSD Consolidation in EURUSD pair continued in the last week and price tested the low of $ before closing at $ , down by 121 pips. Price is well above 18 pd EMA and consolidation around the same is likely. On the technical setup, RSI(14) is trading in neutral region with positive slope indicating higher level possibilities. On the upside interim resistance is placed around $ trading above the same likely to take price towards $ However, Price momentum is of corrective nature, and is likely to consolidate at higher levels around $ On the downside interim support is expected around $ sustaining below the same likely to trade lower towards $ Concisely, EURUSD is likely to consolidate above $ and eventually inch higher towards $ in the forthcoming few weeks. 5

6 Holistic view on USDINR and EUR USD Market Last Closing (Sep28, 2012) USDINR Spot EURUSD Spot Price Outlook and Direction (1 month) Price is likely to trade in the range INR and INR Prices are likely to consolidate around $ and then move higher. Price Outlook and Direction (2 3 months) Price is likely to consolidate around INR and then move higher towards INR 54. Prices are likely to trade higher towards Key Economic Data Releases / Events in this week Date Zone Release Consensus Previous 01 Oct US ISM Manufacturing PMI US Fed Chairman Bernanke Speaks 02 Oct US Total Vehicle Sales 14.4M 14.5M Euro Retail Sales m/m 0.0% 0.2% 03 Oct US ADP Non Farm Employment Change 148K 201K US ISM Non Manufacturing PMI Oct Euro ECB Press Conference Euro Minimum Bid Rate 0.75% 0.75% US FOMC Meeting Minutes US Unemployment Rate 8.2% 8.1% 05 Oct US Non Farm Employment Change 111K 96K Euro Final GDP q/q 0.2% 0.2% 6

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