Daily Market Report: Tuesday - November 27, 2012

The Indian Rupee opened at 55.45 levels after closing at 55.53 levels on Friday. The Intraday range for the rupee is seen between 55.10 - 55.65 levels.

The Indian stock markets have remained attractive for overseas investors, as foreign entities have pumped in over USD 19 billion so far. This is the second highest net inflow by FIIs in a single calendar year from their entry into Indian capital markets in 1992. In 2010, overseas investors had made net investments of about USD 29 billion.

The winter session of parliament, as expected, opened with retail FDI being opposed by opposition parties. The logjam is expected to continue for some time. Unless the government is able to convince its allies and some fringe parties, the FDI vote could shake investor confidence. An all-party meeting on Monday should provide further clues.

The Asian markets are trading positive as South Korean consumer confidence increased and on the hope Greece can avoid a near-term bankruptcy, with Euro-zone finance ministers meeting later in the day.

The Global equity markets closed higher week on week on the back of expectations that the US Fiscal Cliff will be averted. Equities were also helped by positive China manufacturing data and with positive German business confidence data. The Separatists in Spain's Catalonia won regional elections on Sunday but failed to get the resounding mandate they need to push convincingly for a referendum on independence.

The 10 year Benchmark government bond, saw yields rising by 4bps week on week to close at the 8.23% level. The yield is likely to trend higher to levels of 8.30% on worries of higher borrowing and tightening liquidity conditions.

Outlook: Exporters sell close to 55.30 at least 30-40% for next 3 months or partially for longer term (8-12 months only) keeping a stop loss of 55 levels in case unable to cover at these levels. The rupee is still expected to be weak with some dips in between. Uncovered Importers are still recommended to cover on dips close to 54.50-54.80 levels. Overall USD/INR pair remains in a bullish trend. Rupee is weakening despite dollar getting weak against overseas.

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