This is in continuation of our June monthly report bit.ly/11FPpaX which is
reviewed today after RBI policy review announcement.
The Reserve Bank of India (RBI)
in its June mid quarter monetary policy review on Monday left its key policy
(repo) rate unchanged at 7.25 percent in line with expectation. Cash reserve
ratio (CRR) remained at 4 percent. "It is only a durable receding of
inflation that will open up the space for monetary policy to continue to
address risks to growth," the RBI said in its release. RBI's key concern
is the high food inflation, which has not been declining in line with the
non-food and WPI inflation. Foreign fund flows into Indian equities too have
slowed down considerably over the last month. Cutting interest rates when the
rupee is falling could further make the currency unattractive to foreign
investors. Federal Open Market Committee (FOMC), the US Federal Reserve's
policymaking body, is meeting on June 19. Everybody from equity, bond, and
currency markets is keeping an eye on this. So, is the RBI, which is
also expected to take cues for its April-June quarter policy to be
announced in July. Speculation of a possible cutback in the US Federal
Reserve’s monetary stimulus has already raised fears of liquidity flows into
emerging markets like India slowing down. The fears, if proved true, could have
serious repercussions for countries like India, which are heavily reliant on
foreign capital flows to bridge their current account deficit. In a separate statement
from Commerce secy on May trade data the key points are :
- Trade data for May released today showed the country's exports at $24.51 billion versus $24.16 billion on month.
- Imports in the same month stood at $44.65 billion versus $41.95, up 7% from a month ago.
- Oil imports in May at $15 billion versus $14.1 billion compared to month ago period.
- Trade deficit for the country was at $20.14 billion versus $17.8 (month-on-month).
- May gold and silver imports stool
at $8.3 billion versus $7.5 billion (month-on-month)
Gold and silver imports are responsible for high trade deficit, the Commerce Secretary said today. - Textile exports are doing well, he said, while engineering exports are seem to be improving, he said.
June Trade data is expected to be on positive side as key measures taken
on gold import front will help to ease the trade deficit in June. Evidence
suggests a moderation in gold imports could be underway in June after gold
trading in SEZs has been stopped and import curb on gold implemented on
consignment basis. As per new guidelines gold import can be done on 100% cash
basis. In a separate development, DIPP may push for 100% FDI in defence production
and govt allows 100% FDI in mobile tower business. These steps will help in
short to medium term in rupee. However June19th will be very crucial date for
market as FED announcement will pan out further development on QE programme.
On technical chart by & large Rupee is most likely to remain
slightly bearish with mild correction up to 56.50 for rest of the month. Rising
parabolic SAR stopped out at 57.40 on USDINR pair suggests any momentum shift
on rupee appreciation will be based on how Rupee closes above 57.40 levels on
two consecutive sessions for touching any level around 56.50. Any appreciation
in Rupee for this month above 56.50 is dim; however any announcement or steps
taken from govt may ease pressure on rupee. In a very extreme conditions Rupee may retest its
all time low at 58.98 or breach it further. On chart 58.40 is strong support
for rupee to hold and 58.67 crucial levels for rupee to stay above this level. Any
breach of 58.67 may open further weakness in rupee which may results in touching
all time low. Range for next 9 trading session 56.95-58.57.
With Inputs from Moneycontrol & RBI press statement,
complied by Amit Daga.
A
disclaimer: Read the Disclaimer in earlier posts. This post is for information
purpose only and not advising any individual or organization on taking any
trading decision. The blogger may or may not have any personal interest in the
above said the report.
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