Sell Indian rupee on pullbacks: Karvy

Karvy Stock Broking has come out with its report on Indian rupee. The research firm expects the rupee could test the trend-line supports of a falling wedge pattern around 54.17-54.15. Recommend selling on pullbacks for the day.

The rupee depreciated 0.11percent against the dollar on Friday. It closed at 54.3413 from the last settlement’s 54.2825 after taking cues from the domestic indices.  Asian equities ended on a lower note following speculation that the new Governor of the Bank of Japan may delay any aggressive monetary policy. A similar trend was also seen in the domestic indices; the Sensex fell by 0.30percent, closing at 18735.6 and the Nifty inched lower by 0.13percent to 5651.35.

European equities ended marginally lower on Friday as investors were waiting for the outcome of the Cyprus bailout plan, keeping uncertainty prevalent in the euro-zone. The DAX ended at 7911, losing 0.21percent. The CAC was down by 0.12percent while the FTSE gained by 0.07percent.  On Friday, the U.S. stock market edged higher on optimism that Cyprus would pass a plan that would allow it to qualify for a bailout. The Dow Jones Index gained 0.63percent or 90 points, ending at 14512.

Outlook:
 
The treaty between Cyprus and the European Union on financial aid to Cyprus has been approved over the weekend. This has brought optimism to today’s market. This morning, Asian equities are trading marginally positive; the euro is higher by 0.30 percent at $1.3030. Asian currencies are also trading in positive territory. Therefore, we should see the rupee making a higher opening against the dollar. However as the day progresses, we need to understand if the approval of financial aid to Cyprus will have a positive effect for the entire day because the overall global scenario is still fragile.

This should continue to be a concern and it is likely that initial gains might retract. In the mean time, there are no major economic data releases expected from Asia and Europe. The market therefore would only be watching the developments from Cyprus. From the US, we are expecting the manufacturing numbers which are likely to improve and possibly help the dollar appreciate. Some weakness should be felt in the major currencies. There is no news, events or data expected from the domestic end. Overall, we expect the rupee to appreciate for sometime but retreat after.

USDINR Spot:
 
The rupee remained subdued on Friday, trading within a stiff range of 54.25 to 54.41. On the technical front, the pair ended forming a Doji pattern on the daily chart and the RSI-14 momentum indicator also remained flat at 0.51. For the day, we expect the rupee could test the trend-line supports of a falling wedge pattern around 54.17-54.15. We recommend selling on pullbacks for the day.

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