Daily Market Report: Monday- October 15, 2012

The Indian Rupee opened weaker at 53.00 levels after closing Friday at 52.80 levels. The intraday range for the rupee is seen between 52.80-53.30 levels.

The Indian Rupee gave up some gains on weak equity markets.The trade deficit for September 2012 was the highest seen in the past eleven months as exports weakened for the month.

The Inflation figure is expected to come in at over 7.5% levels for the month of September 2012. Inflation for August 2012 stood at 7.55%. The diesel price hike made by the government to bring down its subsidy bill will impact September 2012 inflation. The market will be having a keen look at the RBI policy review on 30th of October with expectations of repo rate cut.

The FII's were gross buyers of shares worth Rs 30,605 crore, while they sold equities amounting to Rs 20,223 crore -- translating into net inflow of Rs 10,382 crore i.e. USD 2 billion and Rs 1,273 crore in the debt market so far this month. The Foreign Institutional Investors' (FIIs) investment in the country's equity market has reached Rs 92,713 crore (USD 17.84 billion) so far this year.

Looking at the international factor, China reported better-than-expected export data and the slowest inflation rate in two years. The most important events this week are the US Retail Sales, Minutes from Reserve Bank of Australia's Monetary Policy Meeting, Minutes from Bank of England Monetary Policy Meeting, Chinese GDP, and EU Leaders Summit.

The EU Leaders are meeting in Brussels at the end of this week to discuss Greece, Spain and the sovereign debt crisis. Based on the comments out of the European Finance Ministers meeting, there is a good possibility that the next aid payment for Greece will be unlocked but don't expect any decisions on Spain.

The Liquidity as measured by bids for repo in the LAF (Liquidity Adjustment Facility) auction of the RBI tightened last week. The Bids for repo averaged Rs 61,000 crores on a daily basis against an average of Rs 36,000 crores seen in the week previous to last. The government auctioned Rs 13,000 crores of bonds last week. The government is scheduled to auction Rs 13,000 crores of bonds this week.

Outlook: Rupee has made a temporary short term bottom below 51.50 levels. Exporters can sell above 53.00 levels, importers who couldn't cover at 52 levels can cover close to 52.60 levels. Exporters maintain selling partially only in the long term. Rupee is expected to be in the range of 52 - 54 levels for the next couple of months. 

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