Federal Budget To Steal Limelight

USD/INR 1-month NDF last +0.08 at INR74.84 ahead of India's budget announcement. Trading on local onshore markets has not opened yet.

• A break above Jan 27 high of INR75.57 is needed to signal that bullish momentum is picking up. Conversely, a retreat under Jan 21 low of INR74.54 would give bears a green light for targeting Jan 12 multi-month low of INR73.96.
• India's FinMin Sitharaman will deliver the federal budget at 11:00am local time. The government will be trying to strike a fine balance between the competing goals of supporting GDP growth and reducing fiscal deficit. The main focus will fall on the outcome of this balancing effort.
• Earlier this month, the Economic Times reported that the fiscal deficit target for the coming FY will be set at 6.3%-6.5% of GDP. This would represent "a less ambitious target than previously planned as Covid-19 infections threaten the economic recovery."
• The budget speech comes at a politically sensitive time, with several Indian states preparing for assembly elections this month. Some analysts have suggested that electoral concerns might draw the government's attention away from fiscal consolidation, tipping the balance in favour of pro-growth initiatives.
• It may be worth paying attention to the details of the budget speech. BBG notes that Indian officials used the address to unveil regulatory tweaks regarding overseas fund-raising or bond issuance rules.
• Although budget matters are set to steal the show today, it is worth noting that the Western Indian state of Maharashtra eased Covid-19 restrictions, allowing tourism-related activities and a range of entertainment facilities to reopen. Maharashtra is India's second-most populous state, while its capital Mumbai is a key economic hub.