Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

For some time one of the favourite trends here has been the bullish one on the Nifty Index. There were numerous targets in mind including 17,400 on the Nifty Index itself and 240 on the Nifty in USD termsThis week we met the 17,400 target. At the same time the bulk of the move down on USDINR looks to be behind us. Looking at the relevant charts below it is prudent at this stage to expect a consolidation or correction down and possibly opportunities to re-engage in the Nifty Index at better levels later.Charts: Nifty Index | USDINR | Nifty in USDs | Nifty Index versus S&amp;P 500 Ratio

For some time one of the favourite trends here has been the bullish one on the Nifty Index. There were numerous targets in mind including 17,400 on the Nifty Index itself and 240 on the Nifty in USD termsThis week we met the 17,400 target. At the same time the bulk of the move down on USDINR looks to be behind us. Looking at the relevant charts below it is prudent at this stage to expect a consolidation or correction down and possibly opportunities to re-engage in the Nifty Index at better levels later.Charts: Nifty Index | USDINR | Nifty in USDs | Nifty Index versus S&amp;P 500 Ratio

India’s Nifty Target Met - Time for a Consolidation

In Asia the market that still looks attractive is India’s Nifty as it trades near the trend highs. Previous examples of a rally and breakouts on the Nifty Index saw the market move more than 10% from the base. Since we started from a recent low of 15,513, we could expect at least 17,064 if not the 17,400 area before seeing a consolidation or a meaningful pullback.Such a move coupled with USDINR looking like it could make it to the base of the range - approximately 72.50 - would put the Nifty in USD terms at 240 which is still 7% above current levels.Indeed, it might even be in India’s interest to see a slightly stronger currency given the trade deficit and the rising Oil price.

In Asia the market that still looks attractive is India’s Nifty as it trades near the trend highs. Previous examples of a rally and breakouts on the Nifty Index saw the market move more than 10% from the base. Since we started from a recent low of 15,513, we could expect at least 17,064 if not the 17,400 area before seeing a consolidation or a meaningful pullback.Such a move coupled with USDINR looking like it could make it to the base of the range - approximately 72.50 - would put the Nifty in USD terms at 240 which is still 7% above current levels.Indeed, it might even be in India’s interest to see a slightly stronger currency given the trade deficit and the rising Oil price.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

In this week’s Alpha Bites, we recommend closing the long Indian rupee versus the short Korean won trade. One of our rationales behind the trade was that the second wave of coronavirus was likely to delay but not derail the Indian economy. Moreover, with inflation staying outside the Reserve Bank of India’s target band, we expected it to gradually start tilting hawkish. Both expectations are playing out with the economic recovery back in place and one member of the MPC voting against keeping the accommodative stance at the last meeting. The rupee, in turn, has made up some of its lag with its Asian peers, allowing us to recommend taking profits on the trade.

In this week’s Alpha Bites, we recommend closing the long Indian rupee versus the short Korean won trade. One of our rationales behind the trade was that the second wave of coronavirus was likely to delay but not derail the Indian economy. Moreover, with inflation staying outside the Reserve Bank of India’s target band, we expected it to gradually start tilting hawkish. Both expectations are playing out with the economic recovery back in place and one member of the MPC voting against keeping the accommodative stance at the last meeting. The rupee, in turn, has made up some of its lag with its Asian peers, allowing us to recommend taking profits on the trade.

Alpha Bites: Take Profits on Long Indian Rupee Vs Short Korean Won

Technical Analysis

Over the past few months India has been horribly torn apart from the Delta variant of Covid-19. Back in May I thought there was a serious risk of a notable correction down in the equity market, but it never came. Since then we have seen<ul type="disc">
<li>A higher Oil price, </li>
<li>The IMF significantly downgrading India’s GDP forecast and</li>
<li>Renewed concerns of Covid spreading.</li>
</ul>Despite all that, India’s Nifty has not only failed to correct down (it simply went sideways for 7 weeks) but has now posted what looks like a clear bullish break to new highs, not only in INR terms but also in USD terms.With USDINR beginning to turn from the top of the ‘range’ - as it probably needs to given a barrel of Oil costs some 5,300 Rupees – the recent breaks look very good. Further gains in the stock market and Rupee seem very likely not only over the coming days but perhaps weeks. Charts and further details below…

Over the past few months India has been horribly torn apart from the Delta variant of Covid-19. Back in May I thought there was a serious risk of a notable correction down in the equity market, but it never came. Since then we have seen
A higher Oil price, 
The IMF significantly downgrading India’s GDP forecast and
Renewed concerns of Covid spreading.
Despite all that, India’s Nifty has not only failed to correct down (it simply went sideways for 7 weeks) but has now posted what looks like a clear bullish break to new highs, not only in INR terms but also in USD terms.With USDINR beginning to turn from the top of the ‘range’ - as it probably needs to given a barrel of Oil costs some 5,300 Rupees – the recent breaks look very good. Further gains in the stock market and Rupee seem very likely not only over the coming days but perhaps weeks. Charts and further details below…

As a group, Asian currencies have underperformed the broad EM complex this year. Several factors are behind this underperformance: delay in the economic recovery due to the slow pace of vaccination, differences in monetary policy stances with much of the rest of EM already raising rates, and aggressive FX interventions. With these factors still broadly applicable, we see no reason for Asian currencies to outperform in the near term. Instead, we find differentiation among countries in Asia providing relative-value opportunities.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

As a group, Asian currencies have underperformed the broad EM complex this year. Several factors are behind this underperformance: delay in the economic recovery due to the slow pace of vaccination, differences in monetary policy stances with much of the rest of EM already raising rates, and aggressive FX interventions. With these factors still broadly applicable, we see no reason for Asian currencies to outperform in the near term. Instead, we find differentiation among countries in Asia providing relative-value opportunities.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Will Asian Currencies Continue to Underperform?

India

The Indian rupee is the official currency of India. 

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India’s Nifty Target Met - Time for a Consolidation

India's Nifty Index has met the topside target in Rupee terms and almost in USD terms. Recent price action suggests it is prudent to step back and...

Shyam Devani

India Markets Refreshed

India's Nifty is still in an uptrend and looks even more attractive in USD terms as USDINR threatens to take out supports.

Shyam Devani

Alpha Bites: Take Profits on Long Indian Rupee Vs Short Korean Won

India’s economic recovery has resumed after the deadly second wave of coronavirus and the RBI turned slightly hawkish, allowing us to close the...

Gautam Jain, PhD, CFA

India: Breaks and Targets

The breaks seen on the Nifty Index as well as USDINR are notable points of interest. Here we look at where the potential targets are

Shyam Devani

FX Dashboard: Will Asian Currencies Continue to Underperform?

Asian currencies have underperformed and are likely to continue doing so because of the impact on growth and monetary policy from the low...

Gautam Jain, PhD, CFA

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52-week Range

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