DAILY MARKET COMMENTARY 14 th October, 2014
Domestic and International Highlights Indian rupee opened at 60.93 after closing the previous session at 61.10 levels. The intra-day range is seen between 60.85-61.25 levels. September Inflation Exceeds Expectations at 6.46%, an All-Time Low The Consumer Price Index (CPI) fell in September to a record low of 6.46%, against 7.2% eyed and previous level of 7.8% released in August. Sharp decline in food prices and a favorable statistical base helped the decline in inflation. Core inflation reduced to 5.9% from 6.9% previous month, while fuel inflation eased to 3.45%. RBI's stand on controlling inflation has turned out to be fruitful. However, declining industrial production might drive the central bank to rethink further strategies. Concerns of risks linked to sub-normal monsoons and rising geopolitical tensions would be important aspects to consider future price escalations. Arbitrage Opportunities in NDF decline on Account of Stable Rupee The spread in the one month contract maturity now stands at 10-11 paisa relative to 22-23 paisa in May-June when rupee was on an appreciating trend. Traders looking to sell dollars in the NDF markets, expecting a stronger rupee are not unwinding their positions as the US dollar is gaining strength globally. India to Take Steps to Curb Chinese Imports In order to bridge the widening trade gap between India and China, seen to be unsustainable in the long run, the government is looking to put in safeguards to cut the imports. Chinese companies are being invited to invest and open manufacturing bases in India. According to Department of Industrial Policy and Promotion (DIPP), the trade deficit with China stands at $36 billion, with exports standing at $15 billion and imports in the $51 billion range. Indian bond yields closed at 8.42% as against the previous level of 8.46%. The US 10 year treasury yield is trading at 2.25% against the previous level of 2.28%. With the exchange rate becoming increasingly stable, the arbitrage opportunities have lessened between the USDINR offshore non-deliverable forward market and domestic forwards. Trend: The USDINR pair is still in a bullish trend and an upswing in the market can see the pair gather momentum towards 61.80-62.00 levels again. Outlook Exporters are now suggested to hold for cover, with a target of 61.40-61.50 levels. (They are suggested to discuss their positions with their respective RM's). Importers are now suggested to cover close to 61.00 levels after discussing their positions with their respective RM's. Short term range (7-15 days): 60.80-62.00 Medium term range (3-6 months): 59.80-62.50
Key Indices Asian Currencies Benchmark Indices Sensex Closing Change % Change 26366.73-17.34-0.07 Asian Currencies Singaporean Dollar Value (US $) % Change 1.2705 0.1259 Nifty Hang Seng 7870.85-13.4-0.17 23294.66 151.28 0.65 Korean Won 1063.63 0.3921 Philippines Peso 44.76 0.0022 Nikkei 15035.19-265.36-1.73 Indonesian Rupiah 12194 0.0574 Dow Jones Nasdaq Dax 16321.07-223.03-1.35 4213.656-62.581-1.46 8812.43 23.62 0.27 Indian Rupee 61.0137 0.1496 Chinese Yuan 6.1229 0.0555 Malaysian Ringgit 3.253 0.2613 Thailand Baht 32.429-0.0278 FII flows in India 25000 20895 20000 15000 Debt ($ mn) Equity ($ mn) 13604.60 10000 5000 0-5000 252.02-106.23 1154.66-209.07 10th Oct Oct month Year so far Source: Bloomberg
USDINR: Daily Chart USDINR pair met its target of 61.80-62.00 levels last week. After witnessing a break near 61.00 levels, the Indian Rupee is expected to consolidate at 60.80-61.20 levels before resuming its way ahead to 62.00 levels.
EUR/USD The euro strengthened against the U.S. dollar on Monday after a key U.S. Federal Reserve official said rate hikes could be delayed, if the global economic growth continues to flatter. The euro zone will release its industrial production data today. GBP/USD The British Pound was seen under pressure against the US dollar ahead of UK inflation numbers which are expected to be released today. Inflation rate is expected to slow to 1.4% vs the previous level of 1.5%. AUD/USD Australian dollar appreciated against the US dollar despite a downbeat business survey and bearish remarks from a central bank official. The NAB's business confidence and business conditions survey showed confidence at plus 5 in September, down from plus 7 in August. USD/JPY The Japanese Yen was trading flat against the US dollar. The consumer confidence index in Japan surprisingly eased to a level of 39.9 in September, lower than market expectations of 41.8 levels. He overall strength in the pair is seen over the last couple of days on account of Save Heaven appeal.
Gold Precious gold prices are trading near one month high levels as Gold price surges in 5 of last 6 trading sessions. The demand of yellow metal surged as global equity markets continued to tumble on weak economic outlook of the world economy. Crude Oil The Crude oil prices came under pressure as OPEC countries are not expected to cut their supply outlook before their November meeting. The Brunt Crude fell near 4 year low levels as it fell by more than $2 in a single day. Dollar index The US dollar witnessed a further drop against other major currencies on concerns of weak global economic outlook. Fed officials have maintained to keep interest rates low to support the global economy. Economic Calendar Date Description Actual Forecast Previous Oct 14 Tues GBP CPI y/y - 1.4% 1.5% Oct 14 Tues EUR German ZEW Economic Sentiment - 0.2 6.9 Oct 15 Wed CNY CPI y/y - 1.7% 2.0% Oct 15 Wed USD Core Retail Sales Data - 0.2% 0.3%
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