Rupee Expected To Weaken Slightly At Open

Indian markets return after a holiday yesterday, late on Wednesday before the holiday industrial production and CPI data was released. Industrial production rose 22.4%, above the 20% forecast. While this bodes well, the reading benefits from a low base effect, while the near term outlook is clouded by the current surge in COVID-19 cases and lockdowns in several states. Bloomberg estimates that around 60% of the country's GDP is in full lockdown with much of the remaining in partial lockdown.

• CPI slowed to 4.29% in April from 5.52% in March, but was above estimates of 4.10%. The decline was led by food prices, but is expected to be short-lived as lockdowns and cause supply shortages while a jump in commodity prices will also exert upward pressure. Even so, the RBI has stated its intention to look through inflation overshoots against the 2%-6% band.
• Markets today will receive an update on wholesale price inflation, the April print is expected at 9.35% from 7.39% previously
• Since the cash close on Wednesday INR 1-month NDF's initially rose to 74.10 from around 73.80, but have since moved back to 73.8725.