INR: Rupee Volatility Settles Following Turbulent Post-Election Period

USDINR ended the session just above 83.50, placing the pair at the higher end of the 82.50-83.50 band in which price has operated since September. 1-month ahead implied vols have settled below 2.5% after spiking to as high as 3.55% last week after the election results jittered markets.

• However, Goldman Sachs think that the exceptionally low volatility of the INR in recent months may pick up a touch post-elections. But even so, they believe INR should remain more insulated to global shocks relative to other currencies and screen at the top of carry-to-vol metrics.
• The Nifty and Sensex indices closed moderately lower today having recorded fresh all-time highs earlier in the session. Both are just under 10% higher compared to levels seen following the sell-off last Tuesday. Indeed, last week, analysts flagged that Indian equity funds attracted the biggest weekly inflows on record as investors bought into the selloff.
• Data-wise, CPI figures for May will provide the highlight of the week on Wednesday. ING note that with no big swings in any of the important food categories in May, it looks likely that the index will rise by a modest 0.5% m/m, almost unchanged compared to April on a year-on-year basis. This should have no immediate consequence for the RBI who meet next on Aug 8.