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Local Equities Stage Recovery Following Recent Sell-Off, USD/INR Still Close to 2-Month High

INDIA
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The Nifty 50 index recorded gains of 0.79% Thursday, following the rally across the major global equity indices in the build up to and following yesterday's Fed decision. That places the index back above the 50-DMA, an average which was breached for the first time since November earlier in the week.

  • Small- and mid-cap stocks had been leading declines in Indian equities over the past week, after the capital market regulator highlighted growing exuberance in such stocks and warned of “patterns of price manipulation” in some new listings, triggering a selloff. That resulted in the Nifty nearly erasing its YTD gains. The index is up ~1% in 2024 as of today.
  • The S&P BSE Small Cap Index, covering smaller cap Indian names, is set to erase losses from earlier this week, though JP Morgan noted earlier this week that small- and mid-cap stocks may remain volatile in the coming weeks, with margin funding and investor flows adding to risks.
  • A 16-year high in India’s Manufacturing PMI (59.2 from 56.9 in February) will have aided gains in local equities, with the data providing further evidence of India’s robust industry performance.
  • But despite the rally in equities, the rupee lagged its regional peers during APAC trade. USD/INR closed close to flat, and comfortably above the 50-day EMA again, after recording a 2-month high yesterday.
  • According to Bloomberg, SMC Global Securities note that while soft US yields are likely to support a rebound in the rupee, corporate dollar outflows ahead of the financial year may exert downward pressure on the currency. They expect the range for USD/INR by the end of this month to be between 82.90 and 83.20.
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The Nifty 50 index recorded gains of 0.79% Thursday, following the rally across the major global equity indices in the build up to and following yesterday's Fed decision. That places the index back above the 50-DMA, an average which was breached for the first time since November earlier in the week.

  • Small- and mid-cap stocks had been leading declines in Indian equities over the past week, after the capital market regulator highlighted growing exuberance in such stocks and warned of “patterns of price manipulation” in some new listings, triggering a selloff. That resulted in the Nifty nearly erasing its YTD gains. The index is up ~1% in 2024 as of today.
  • The S&P BSE Small Cap Index, covering smaller cap Indian names, is set to erase losses from earlier this week, though JP Morgan noted earlier this week that small- and mid-cap stocks may remain volatile in the coming weeks, with margin funding and investor flows adding to risks.
  • A 16-year high in India’s Manufacturing PMI (59.2 from 56.9 in February) will have aided gains in local equities, with the data providing further evidence of India’s robust industry performance.
  • But despite the rally in equities, the rupee lagged its regional peers during APAC trade. USD/INR closed close to flat, and comfortably above the 50-day EMA again, after recording a 2-month high yesterday.
  • According to Bloomberg, SMC Global Securities note that while soft US yields are likely to support a rebound in the rupee, corporate dollar outflows ahead of the financial year may exert downward pressure on the currency. They expect the range for USD/INR by the end of this month to be between 82.90 and 83.20.