INDIA: TD Expect INR to Outperform Asia Peers, India Stocks Appear Overbought

Moderate weakness in the yuan overnight weighed on most major Asian currencies during the APAC session, with USD/INR consolidating close to this week’s highs.

• According to a note published by TD, investors are betting on the Indian rupee as the currency is likely to outperform Asian peers in a strong dollar environment. Nevertheless, TD’s house view is that USD/INR will rise toward year-end, but they add that “INR losses will be capped versus the USD given its high-yielding nature and RBI’s intervention”
• Meanwhile, the Nifty and Sensex indices continue to post fresh record highs, with both over 7% higher since the beginning of June as post-election investor sentiment remains positive over the prospects of continued economic reform. 
• The substantial rally has resulted in the 14-day RSIs for both rising a touch above the ‘overbought’ 70-threshold, while Bloomberg note that India’s aggregate market capitalisation is now north of $5trln, with the market cap to GDP ratio the highest since 2007.