Stocks rise, USD weakened after US Congress approves stimulus package
|We witnessed an emphatic recovery in global equities in the past couple of days. The US parliament approved a USD 2tn stimulus package which would put money directly into the hands of citizens. The Dow has recovered 15% from recent lows and the US Dollar has weakened across the board.
The Nifty opened on a cautious note, reacting to the announcement of a 21 day nationwide lockdown but caught up with global indices, ending 6% higher yesterday.
India would need to follow the US template to ensure that the economy tides over this period. The government needs to announce further stimulus measures to keep MSMEs alive and the RBI needs to ensure that the banking system system remains flush with liquidity. The Philippine central bank has cut Reserve requirement for banks, the Reserve Bank of Australia has purchased state government bonds.
US jobless claims are due today. They are expected to surge sharply to 1 million from 281k last week. President Trump wants to reopen the US economy by 12th April which many experts believe would not be a great idea.
There are dislocations between the OTC and futures markets that one can look to capitalize on. April futures were 30p above onshore on Tuesday.
Strategy: Exporters are advised to hold. Importers are advised to go for back to back hedging or through RR option strategy (Buy Call, Sell Put). The 3M range for USDINR is 73.00 - 77.00 and the 6M range is 72.0 – 78.00 considering the panic situation amid coronavirus spread.
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