Daily Market Report: Monday - November 5, 2012

The Indian Rupee opened at 54.00 levels after closing last week at 53.81 levels. The Intraday range for the rupee is expected between 53.90-54.25 levels.

The Asian Markets are trading lower, tracking a sell-off in global shares late last week, as investors continued to shed risk ahead of the closely fought U.S. presidential election. The U.S. President Barack Obama and Republican challenger Mitt Romney were neck-and-neck in opinion polls in the final 48 hours before Tuesday's vote.

The positive data from the US and China helped equity markets across the globe close positive to flat week on week. The better than expected economic data for the US helped the US Dollar higher.

The outcome of U.S. elections will shape policies on addressing the "fiscal cliff" of about $600 billion in expiring tax cuts and spending reductions due to take effect in January. This drop could hit the U.S. economy harder than expected.

The Spain's reluctance to seek financial aid is stoking worries that Europe's debt crisis could further hurt world growth. The government is under pressure to seek a bailout as it struggles to cope with high public debt and the cost of recapitalizing its banks. The Spain is expected to ask for bailout in November. The Prime Minister Mariano Rajoy had not ruled out applying for a rescue, but Rajoy has signaled he will not rush unless market conditions deteriorate significantly.

The CRR cut of 25bps will release Rs 17,500 crores into the system. The system is drawing down around Rs 80,000 crores from the RBI for meeting its daily fund requirements. Bids for repo in the LAF (Liquidity Adjustment Facility) auction of the RBI saw bids average Rs 75,000 crores on a daily basis last week against an average of Rs 85,000 crores seen in previous to last week.

Outlook: Exporters can sell above 54 levels only for long term partially (8-12 months only). The rupee is expected to be in the range with a weaker bias. Uncovered Importers cover on any major dips of 40-50 paisa or anytime costing is met. Overall USD/INR pair bullish.

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