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Rising trade deficit to dampen rupee's prospects (Currency Watch)
By Rohit Vaid
New Delhi, Jan 17 (IANS) Rising trade deficit along with chances of a populist budget might dampen rupee's prospects during the coming week.
Nevertheless, persistent interest of FIIs in India's equity market will arrest any sharp depreciation moves.
"The 25-month high trade deficit may put brakes for strong rupee appreciation. Equity markets also looks stretched and a cool-off looks imminent now. Eyes will be on the budget and the ballooning fiscal deficit, which can be a challenge for the local currency," said Sajal Gupta, Head, Forex and Rates, Edelweiss Securities.
On the other hand, new IPOs and hopes of healthy Q3 earning results will retain FIIs' interest in equities.
"We have two IPO subscriptions next week, which can attract FII participation and keep the USDINR spot lower," said Rahul Gupta, Head of Research-Currency at Emkay Global Financial Services.
"However, RBI's intervention will be eyed. In spot 73 is acting as strong support, a break of which will push prices towards 72.70-72.75 and then the 72.50 zone. However, 73.50 will act as immediate resistance," he added.
Till now in January, FIIs have invested around $ 2.3 billion in equities.
Consequently, the rupee continued to appreciate and closed at 73.07 to a greenback.
"We have an important event this week. President-elect Joe Biden and Vice President-elect Kamala Harris will be sworn in during the 59th inaugural ceremony in Washington DC on January 20. It is important that this event passes peacefully in light of the recent violent attack by Trump supporters on the US Capitol. We expect rupee to consolidate in the range of 72.75 to 73.3 for this week with depreciating bias," said Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities.
The swearing-in assumes significance since the incoming US administration has announced a new stimulus package. If enacted, the $1.9 trillion package will deliver a further jolt of fiscal stimulus to the struggling US recovery.
"As the newly elected President takes charge more clarity on the stimulus package will be important to watch. Market participants will also be keeping an eye on the ECB and Bank of Japan policy statement; expectation is that the both the major central banks are expected to maintain a dovish outlook," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
(Rohit Vaid can be contacted at rohit.v@ians.in)
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Julius Baer upgrades India, fastest growing major economy
New Delhi, March 6 (IANS) Singapore-based fund house, Bank Julius Baer, has upgraded India to overweight as it will be the fastest growing major economy in 2021.
"We change our stance on India from market-weight to overweight and see 15% upside from current levels with a Sensex price target of 58,450," it said in a note.
"An economic recovery is underway, and we look for 9% y/y GDP growth this year, followed by 7% next year. We look for earnings per share to grow on average over 25% over the next 3 years. It would be unprecedented for the stock market to fall in an environment of such strong growth," it added.
Scientists think "herd immunity" has been achieved in large parts of the country, which would explain why daily new cases have fallen from almost 100,000 in September to less than 15,000 presently.
Lockdowns are imposed still in specific areas that experience Covid outbreaks, but high frequency data shows that has not stopped a continuous recovery following the nation-wide lockdown from March to July of last year. For example, anonymized data gathered shows the mobility of people using Android-based smartphones is almost back to pre-Covid levels, it added.
An Initial Public Offering of LIC, India's largest insurer with $464 billion in assets, is planned for the second half of FY2022. The divestment of this company in particular will enable the government to manage its fiscal position.
The budget has set up a special purpose vehicle to sell the idle/non-core assets (especially land) of SOEs. Much of the idle land is well-situated and could be made productive, benefiting economic growth. Divestment of LIC and BPCL remains the key to meet the fiscal deficit target without compromising spending in FY22E, the research said.
With only the brief exception at the bottom of the Global Financial Crisis, in recent history India's stock market has always traded at a premium to its emerging market counterparts. The current premium of 40% is around the long-term average, it added
--IANS
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