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Rupee Expected To Depreciate Further

Monday, June 30, 2014
By Pramit Brahmbhatt

Pramit Brahmbhatt is CEO of Veracity Group

The Rupee traded sideways throughout last week, though eventually it appreciated slightly towards the end the week. After declining for two consecutive weeks, last week the Rupee traded strong as FIIs were net buyers on the exchanges of the shares worth Rs 162 crores till last Thursday which helped the Rupee to trade slightly strong. The Rupee’s gain was capped as local equities continued to trade weak for the third consecutive week in a row taking cues from growing tensions in Iraq. Now Investors are eagerly waiting for the budget, which is scheduled on 10th July to give direction to the road ahead to the Indian markets. Today the trading range for the Spot USD/INR pair is expected to be within 59.70 to 60.50.

It is recommended to be cautious and buy USD/INR (Futures) on dips with appropriate stop loss as overall Rupee is expected to depreciate. Pivot Point for the Pair is at 60.16 and below is the Support & Resistance levels.

Last week the government of Bharatiya Janata Party and its allies completed a month in office. In this short span, the BJP government took some vital decisions which had their impact on the markets. The last month was eventful as Prime Minister Narendra Modi took some major steps in the first month itself with reference to defence, black money, food security bill, finance, infrastructure, oil sector and many others. As expected the new government is in favour of business friendly policies though they are being cautious due to high inflation , which is a big concern and to make things worse, Indian Meteorological Department's has declared that, this monsoon, India is likely to have below average rainfall. So at present Modi’s biggest challenge is to keep the inflation down. Investors are treading cautiously and are waiting for the budget to be announced on 10th July for the further cues.

At the start of last week, gold traded strong and made a high of $1325.98 after taking cues from conflicts in Iraq. But in the second half of the week gold prices came down mainly due to the data released by China, (the world's largest consumer of gold) which showed that gold imports to the nation from Hong Kong dropped 17.0% to 67.233 tons in May, the lowest level since January last year. Also the data from the US showed that consumer spending grew less than forecast in May while jobless claims in the nation decreased previous week. Mix sentiments of the investors forced gold to give up most of its weekly gain. Though gold is heading towards to post its fourth weekly gain in a row, at present it is trading flat at $ 1315 compared to previous week’s closing of $1314.53.

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