The reflation theme continues to dominate globally. Commodity prices are soaring. The ISM prices paid data point confirms the price pressures businesses are facing. Inventories are being drawn down and lead times are high as supply is failing to keep up with the resurgence in demand. US 10y yield is a tad higher. US equities ended the session on a positive note. The US Dollar retreated during the US session after US manufacturing data for April came in weaker than expected. US March trade balance, factory orders data is due today. The focus will also be on the RBA monetary policy after BoC tapered asset purchases in its policy.
Yesterday was a good day for INR assets overall. There have been some positive developments on the COVID front with certain states showing initial signs of cases peaking. Equities recouped losses from early in the session to end flat. The Nifty ended above the 14525 marks and therefore the upside momentum is still intact. Bonds rallied with the yield on the benchmark 10y ending the session 5bps lower at 6%. The focus will be on the SDL auction today.
The action in the forward market drove the spot. The Cash Tom points were as high as 4.5p, equivalent to a yield of 22%. Elevated cash Tom points reverberated across the curve. 1m forward yield rose to 8% and 1y rose above 5%. Forwards got paid heavily as the nationalized banks were apparently absent from taking the opposite of trade i.e. receiving forwards. Higher forward points make it expensive to short the Rupee against the Dollar. Spot USD/INR after opening higher, came off from highs around 74.30 to end at the low point of the day at 73.90.
Strategy: Exporters are advised to cover a part of their near-term exposure on upticks towards 74.80-75.00. Importers are advised to cover through forwards on dips towards 73.80. The 3M range for USDINR is 73.50 – 76.00 and the 6M range is 73.00 – 76.50.
This report has been prepared by IFA Global. IFA Global shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. IFA Global nor any of directors, employees, agents or representatives shall be held liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. No liability whatsoever is accepted for any loss arising (whether direct or consequential) from any use of the information contained in this report. This statement, prepared specifically at the addressee(s) request is for information contained in this statement. All market prices, service taxes and other levies are subject to change without notice. Also the value, income, appreciation, returns, yield of any of the securities or any other financial instruments mentioned in this statement are based on current market conditions and as per the last details available with us and subject to change. The levels and bases of, and reliefs from, taxation can change. The securities / units / other instruments mentioned in this report may or may not be live at the time of statement generation. Please note, however, that some data has been derived from sources that we believe to be reliable but is not guaranteed. Please review this information for accuracy as IFA Global cannot be responsible for omitted or misstated data. IFA Global is not liable for any delay in the receipt of this statement. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IFA Global to any registration or licensing requirements within such jurisdiction. The information given in this report is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. IFA Global reserves the right to make modifications and alterations to this statement as may be required from time to time. However, IFA Global is under no obligation to update or keep the information current. Nevertheless, IFA Global is committed to providing independent and transparent information to its client and would be happy to provide any information in response to specific client queries. Neither IFA Global nor any of its directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The information provided in these report remains, unless otherwise stated, the copyright of IFA Global. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright IFA Global and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.