INR:
The pair USD/INR edged high as global sentiment continues to remain cautious. The pair closed last at 55.9950/56 after hitting a record high of 56.2250. India state oil companies lifted the price of petrol for the first time in six months in a gesture of fiscal discipline and this is unlikely to give a significant lift to the embattled rupee. However, since petrol, or gasoline, is not subsidized as part of the budget, the benefit of higher prices will mainly go the country’s big three state refiners. Raising or freeing the price of the far more popular diesel, as well as LPG and kerosene, which are heavily subsidized, would have a much bigger impact on inflation and raising their prices is seen crucial to improving government finances and bolstering the rupee but politically very difficult. The pair is expected fall only if stock market reacts positively and rallies on the hike. The pair is expected to trade in the range 56/56.50 says Rajesh Sharma .Money Matters Financial Services Ltd.
Forward:
Forwards was largely range bound as FIIs paid against receiving interest from nationalized banks, who were receiving on behalf of RBI. 3M and 12M forwards closed at 7.25% and 5.31% respectively. Rajesh Sharma CMD Money Matters says paid positions can be taken on dips on forwards.
Fixed Income Market:
Indian benchmark remained range bound and hovered around 8.52% levels. The hike in petrol prices is expected to have muted impact. The petrol price rise is just expected to have about 10bps impact on inflation which is negligible for a big yield movement. Liquidity seems manageable now but cash crunch might resurface again in June after advance tax outflows. Dealers are not running any long positions ahead of expectations for new 10 year paper. RBI is auctioning rupees 150 bn on Friday and along with that rupees 120 bn buy back via OMO. The OMO is expected to keep a check on any unwarranted rise in yields. The benchmark yield is expected around 8.50-8.57% levels. says Rajesh Sharma . Money Matters Financial Services Ltd.
OIS:
Swaps rose across the curve on fears that petrol price hike might increase inflationary pressures again. 1Y was up by 2bps at 8.01% and 5Y by similar 2bps to 7.48%. Worries on RBI intervention and deregulation of oil prices (petrol) might keep the paying interest alive in OIS. 5Y is expected at 7.45-7.55%.
Equities:
The near term derivative contract for India’s NSE index at Singapore Exchange was up 0.7%, while MSCI Asia ex-japan was up 0.1%. Traders said petrol price hike was positive for oil marketing companies and market expects the diesel and LPG price hike on agenda as well. FII’s were net sellers of Indian stocks worth rupees 3.67 bn on Wednesday.