EMP HAUNTS
INDIA & TIGHT LIQUIDITY IN STOCK MARKET
After india’s massive Q 3 FY 2013 current account deficit (CAD) of 6.7
per cent of GDP, stock markets have rightly focused on the rupee as only
left hope of reviving element. Although
CAD is expected to improve in the final quarter of FY 2013, partly due to seasonal
effects, it is expected to re-widen through the remainder of the year. The nifty happens to be range bound and technical
analysis thus has become tough task without a perfect intraday trading
software. The best trading
software only help to come out of choppy intraday trade in the stock
market where nifty sees volatility of 100 points. With the abundant DM liquidity and reduced
tail risk, inflows have been sufficient to finance the CAD thus far, but we
decided to take a look at exchange market pressure (EMP) to see rupee might be
heading for another significant depreciation episode. The online intraday software tracks
this kind of development. It has far
reaching impact on commodity market too with commodity tips being
clueless of next move.
The RBI is also unlikely to intervene in the given situation
for two reasons. One, we currently
expect short run depreciation pressures to abate and ultimately forecast
INR/USD to end the year around 54.
Second, RBI doesn’t have sufficient resources to alter exchange rate
fundamentals. Stock market in
general and nifty in particular, however expects RBI to intervene to
give a direction to the market. The
trading strategy shall be also based on those factors. The stock market now expects modest
short run depreciation pressures and tight liquidity soon to be fade over. Moreover, political instability / policy
paralysis which could undermine foreign investors’ confidence in India’s reform
momentum and the government’s capacity to address structural impediments to
growth.
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