Global risk sentiment continues to remain buoyant. Apparently, Pfizer has concluded vaccine trials, finding the vaccine to be 95% effective in preventing Coronavirus infection. The US Dollar Index has weakened, approaching a two year low. On the other hand, commodities and commodity currencies have strengthened.
Crude prices have risen 2% despite the EIA data indicating a bigger than expected rise in inventories. In the absence of a second stimulus package, the markets are perhaps expecting the US Fed to deliver more accommodation by extending the timeline of its asset purchases or extending the maturities of bonds it buys.
On the domestic front, the equities continue to exhibit strength. FPIs have poured in around $ 5 billion into Indian equities so far in November and at this pace we seem close to surpassing the record inflow seen in the month of August. Despite the news of RBI imposing a moratorium on LVB, the Nifty staged an intraday recovery to end in the green. Yesterday, USDINR was sold off on broad USD weakness and selling pertaining to Google acquiring a stake in Jio ($ 4.5bn corresponding to 7.73%).
Also, nationalized banks were missing in action. Technically, 73.90 is an extremely crucial support. We expect the Rupee to trade in a range between 74.10-74.45 levels today.
Strategy: Exporters are advised to build long term exposure in 74.60-75.50 range. Importers are advised to cover through options. The 3M range for USDINR is 73.00 – 75.40 and the 6M range is 73.00 – 76.00.