A resounding victory for the Bharatiya Janata party in India resulted in a rally in domestic shares, as the leader, Modi, is considered more investor friendly. The Rupee closed at 58.7825 as a result, up 0.86% from its previous close of 59.29. The recent rise resulted in the Reserve Bank of India selling dollars in the market to reign in the rupee.
Investors Notes:
- Ratings agency Moody’s predicts that economic trends will be some way behind the short term gains as a result of positive investor sentiment.
- A strong chance for a reversal of USD/INR due to dollar demand from oil importers and central banks.
- Inflation still persists which is also likely to cancel out positive depreciation in the rupee, while exporters face significant cost pressures.
- There is strong interest in the USD/INR May contract with resistance in 59.25- 59.35 range, with a good chance of a pullback during this month.
- The current 20 day return on the USD/INR has fallen below the 10th percentile range, suggesting the recent strength will likely reverse.
- Banc de Binary analysts predict the rupee is likely to lose its strength against the dollar, indicating a downward movement in the USD/INR.