China COVID-19 situation and property sector woes continue to remain in focus

Abhishek Goenka IFA Global

Global developments

Apple's decision to slow spending and hiring next year to cope with a potential downturn has dented risk sentiment overnight.

China COVID situation and property sector woes continue to remain in focus. Several home buyers have stopped making mortgage payments as property developers are not likely to be able to complete housing projects. Government is trying to support the sector to avert a housing led crisis.

Price action across assets

US yields have risen 4-5bps across the curve. 2s10s continues to remain inverted (19bps). Dollar has strengthened overnight against majors. Crude prices have ticked lower after yesterday's rally. Brent is trading at USD 106 per barrel. Gold is hovering around the USD 1710 per ounce mark. S&P500 ended with a cut of 0.8%.

Domestic development

USD/INR

Rupee underperformed yesterday despite broad Dollar weakness. After printing a low of 79.72 early on, USDINR inched up steadily. There were persistent bids from oilers through the session. The Dollar demand continued post RBI fix as well.

1y forward yield ended at 3.12% while 3m ATMF implied vols ended 10bps lower at 5.70%.

USD/INR is likely to trade a 79.85-80.15 range with up side bias.

Bonds and rates

Yield on the benchmark 10y bond ended flat at 7.44%. Government managed to switch Rs 8500crs of securities maturing in 2023,2024 to long tenors. Focus will be on the Rs 12340crs SDL auction today. 5y OIS ended 7bps higher at 6.60%. OIS curve is now extremely flat with 1y at 6.38%.

Equities

Domestic equities began the week on a cheerful note with Nifty rallying 1.4% to end at 16278. The strength was broad based with IT and Metal stocks leading the rally. SGX is indicating an open around 16160 for Nifty.

FX outlook of the day

EUR/USD

The short covering bounce ahead of ECB on Thursday took Euro to 1.02 yesterday. It has however retraced significantly overnight to 1.0130. The pair is expected to trade with a bullish bias in an intraday range of 1.0080-1.0203 levels.

GBP/USD

Pound too had crossed the 1.20 mark but is off 100 pips from yesterday's highs. The pair is expected to trade with a bearish bias in an intraday range of 1.1860-1.2039 levels.

USD/JPY

Yen has been trading a 138-138.50 range and is awaiting triggers from the BoJ policy on Thursday. The pair is expected to trade with a bearish bias in an intraday range of 137.81-138.53 levels.

Author

Abhishek Goenka

IFA Global

Mr. Abhishek Goenka is the Founder and CEO of IFA Global. He pilots the IFA Global strategic direction with a focus on relentlessly improving the existing offerings while constantly searching for the next generation of business excellence.

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