Daily Market Commentary: Wednesday, September 26, 2012

Domestic and International Highlights:

The Indian Rupee opened weaker at 53.50 levels after closing yesterday at 53.36 levels. The intraday range for the rupee is seen between 53.30 - 53.80 levels.

The rupee was seen gaining on account flows in the local markets. The concern over Indian economy was little cooled down as the government announced some bold reforms in spite of severe opposition from political parties. The local fundamentals are still the same with lower growth prediction, high inflation and poor investment cycle.

The global market rallied inspired by monetary easing measures taken this month by the U.S Federal Reserve and the Bank of Japan, as well as the ECB's bond-buying plan which is now overtaken by concerns about deteriorating world economies.

The Asian peers are trading lower amid concern over Euro Zone increases and expectation that the stimulus measures by central banks from the U.S to Asia and Europe won't be enough to boost global economic growth.

The Euro Zone concern is creating nervousness among the investors and increasing the demand of the safe haven. Yesterday ECB president Mr.Draghi argued the ECB's bond-buying plan is in Germany's interests and said it was now up to governments to follow with decisive policy steps of their own.

On the other hand, Spain added it needs to know how much the ECB will commit before requesting a bailout. The markets will be closely watching Madrid's ability to control its finances, with ballooning regional debts crippling the government's refinancing efforts.

The US 10 year treasury yield is trading lower at 1.68% from 1.73% yesterday. The Indian 10 year bond yield rose on Tuesday as investors trimmed positions ahead of the government's announcement of its borrowing plan for the second half of the fiscal year. The benchmark 10-year bond yield closed up 1 bp at 8.17%

Outlook: Rupee still maintains a very strong medium term support at 53.10-53.50 levels. Importers still maintain buying on dips completely for Sep and PARTIALLY for Oct months close to 53.10- 53.50 levels. Next stop loss for importers at higher side will be 53.85 levels, if breaks concrete covers need to be taken immediately. Very short term exporters can look at covering in any weakness. 1-2 months exporters wait for better levels.

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