US Sep Durable goods data beat expectations. The overall mood however seems to be that of caution. US Supreme Court saying that states and districts would not have discretion over extending deadlines for receipt of mail in ballots works in favor of president Trump as the Democrat voter base is more likely to vote through mail in ballots. Also appointment of Conservative nominee Amy Coney Barrett to the bench of Supreme Court makes the bench Conservative leaning and which is believed to likely favor Trump in the case of a contested election.
US treasuries saw some safe haven bid. The Dollar staged a modest recovery after weakening initially. US equities ended the session with losses.
MSCI's decision to tweak the Foreign Ownership Factor for Indian equities, taking into account the government's decision to increase the cap on FPI investment in Indian equities to respective sectoral FDI caps would push India's weight in the MSCI EM index to 8.8% from 8.1% currently. This is likely to result in inflows to the tune of USD 4bn into Indian equities. The Rupee strengthened on this news. Month end exporter selling and F&O expiry related selling at fix also limited upside in USDINR.
Today too we are likely to see range bound price action in USDINR. We expect an intraday range of 73.65-74.05. The rally in Gsecs has been accompanied by compression in SDL spreads and corporate bond spreads. Equities may continue to see some positive traction, building on gains from yesterday.
Strategy: Exporters have been advised to cover confirmed order on upticks. Importers are advised to cover through options. The 3M range for USDINR is 72.50 – 74.50 and the 6M range is 72.50 – 75.40.
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