The Indian Rupee has staged a smart recovery from its record low of 57.32 on June 22. The Indian Rupee stayed stronger for the fourth straight session today buoyed by positive investor sentiments on hopes long-stalled reforms will pick up pace after recent clarifications on retrospective tax. Foreign banks sold dollars likely on behalf of their offshore clients looking to invest in the domestic share market. Foreign institutional investors have bought more than Rs 3,500 crore worth of equity shares in two days since Friday. The Indian Rupee appreciated by 63 paise to 54.80 against the US dollar. It was a sharp 4.5% recovery from record closing low of 57.32 to the dollar on June 22. Indian Rupee July Futures shot to 54.75 towards the close of the trading session. Sustaining momentum above the 55 level for the INR is now VERY crucial for further rises.
The government last week increased foreign investor limits in government debt by $5 billion to $20 billion. The increased limits will be auctioned by the stock market regulator on Wednesday. There have been rumors of substantial FII inflows for the debt limit auction which could have triggered the INR to rise also. The bidding at the debt limit auction will be a crucial determinant of the near-term rupee direction. Most foreign banks said the debt auction is expected to see low interest due to the three-year lock-in clause and also on account of July 4 being a U.S.holiday.
Portfolio investors too have turned bullish after the Indian government released draft rules last week and said the general anti-avoidance rules, or GAAR, would not apply retroactively, a big concern for such investors. Equity Markets remained largely range-bound with an upside opening. Nifty July futures touched a high of 5333.70 in the early trade today.
Market watchers are expecting further easing of EU monetary policy soon. European stocks are firmer on the EU rate-cut hopes. Tuesday’s EU producer price data showed Euro zone inflation slowed to its lowest rate in two years, which further stoked hopes for an imminent ECB rate cut. U.S. economic data due for release Tuesday includes the Goldman Sachs and Johnson Redbook weekly retail sales reports, the ISM New York business report, manufacturers’ shipments and orders, and domestic auto sales.
US Markets remain closed on the 4th July due to the Independence Day & trading volumes are expected to be low which in turn can trigger larger market swings amid volatility.
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