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Equity Weakness A Headwind For INR

INR
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Indian markets have re-opened after yesterday's holiday, with onshore equities under pressure. The NIFTY is bucking the more positive trends seen through the rest of the region and is tracking around 0.70% lower at this stage. Sharp falls in Adani, after the short-seller report, remain a headwind, while local banks are also underperforming.

  • The flow on effect to INR is limited so far, but may become more apparent if we see net equity outflows pickup. We had stabilized somewhat in terms of outflow pressures, but Wednesday saw resumed selling pressures from offshore investors. YTD we have seen -$1.6bn in net outflows.
  • Spot USD/INR is modestly higher at this stage, above 81.60 currently, with the early spot move sub 81.50 not sustained. Whilst we remain within recent ranges, for the week, INR FX is the weakest performer in the region, tracking -0.60% lower at this stage.
  • From a technical standpoint, the picture is mixed as the pair is consolidating. Bulls target 100-day EMA (81.95) which sit just ahead of 82.00 round number resistance. Bear look to target the 200-day EMA at 80.16.
  • Outside of equity market gyrations, the commodity price backdrop is a little less supportive, as oil maintains a positive tone into month end.
  • Next week the fiscal budget for the coming financial year will be in focus (Feb 1).
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Indian markets have re-opened after yesterday's holiday, with onshore equities under pressure. The NIFTY is bucking the more positive trends seen through the rest of the region and is tracking around 0.70% lower at this stage. Sharp falls in Adani, after the short-seller report, remain a headwind, while local banks are also underperforming.

  • The flow on effect to INR is limited so far, but may become more apparent if we see net equity outflows pickup. We had stabilized somewhat in terms of outflow pressures, but Wednesday saw resumed selling pressures from offshore investors. YTD we have seen -$1.6bn in net outflows.
  • Spot USD/INR is modestly higher at this stage, above 81.60 currently, with the early spot move sub 81.50 not sustained. Whilst we remain within recent ranges, for the week, INR FX is the weakest performer in the region, tracking -0.60% lower at this stage.
  • From a technical standpoint, the picture is mixed as the pair is consolidating. Bulls target 100-day EMA (81.95) which sit just ahead of 82.00 round number resistance. Bear look to target the 200-day EMA at 80.16.
  • Outside of equity market gyrations, the commodity price backdrop is a little less supportive, as oil maintains a positive tone into month end.
  • Next week the fiscal budget for the coming financial year will be in focus (Feb 1).