Is USDINR Headed towards 100?

Market Update - Tuesday, 02 Dec

The recent strength the markets were showing has been given up, and it seems the conversation has entirely shifted to the USD/INR.

Historically, every sharp move in the USD/INR averages out to be about 19.8%. The pattern involves stagnation, then a sharp move up, then stagnation, consolidation, and another move up, and so on. This current move so far is about 8.8%. If it were to match the historical average, we would be heading near 100.

Currently, we are very near 90, around 89.9. It is very possible that in this move, we will go well beyond 90. Of course, there are no guarantees, but that is what history suggests once the currency is allowed to move.

• Today's market action was quite disappointing, as the position that was established after four days of effort has been somewhat erased. The Nifty was down by half a percent.

• However, Nifty Junior is still holding up, down only 0.1% today, and Midcaps were mildly down by 0.2%.

• Small caps were down 0.44% and are not looking too healthy despite the larger-cap segments of the market moving up; small caps have not followed the leading parts of the market.

• Nifty Bank saw a big fall of 0.68%.

• Gold also looked a bit tired after its recent 7 to 8-day run, down 0.63% to 12834. Silver was also resting today, down 1.32% at 174,000.

Other Market Triggers

• The Nifty heat map was predominantly red, with HDFC Bank, ICICI Bank, Axis Bank, Kotak, and SBI all losing ground.

• Reliance lost 1.26%, and ITC lost 0.8%. Power Grid, BEL, L&T, and Indigo, which were recent gainers, also saw losses today.

• Bharti Airtel, Maruti, Dr. Reddy's, Asian Paints, NTPC, and Hindustan Lever were some of the small gainers in the Nifty Next 50 heat map.

• However, some PSU banks like Bank of Baroda and Canara Bank were still doing well. Bajaj Holdings and Bajaj Housing saw significant sell-offs today.

• Adani & Co, Adani Green, CG Power, Mazdock, Indian Hotels, IOC, and Hindustan Zinc were all coming off.

• JSW Steel, Vedanta, Enrin, Motherson, Siemens, Bosch, Britannia, Naukri, BPCL, and Canara Bank were among the stocks moving up.

• In the 'Mover of the Day' segment, Easemytrip jumped by 20%, seemingly due to the launch of a winter sale.

U.S. Market Update

• US markets in the previous session also lost some ground, with the S&P, Dow Jones, Nasdaq, and Russell indexes down between 0.4% and 1.2%.

• Among individual stocks, Broadcom lost 4%, RTX Corp nearly 4%, and GE Aerospace, Lockheed Martin, and Merck & Co. lost between 2% and 4%.

• Broadcom has seen a significant run recently, so this is a mild correction. Some of these stocks are part of the Weekend Investing U.S. stock strategy, and this is certainly not a recommendation.

What to watch next ?

• Typically, the RBI attempts to protect the rupee, but now it seems they have allowed it to slide to enhance the competitiveness of Indian exports, as we were becoming relatively more valued compared to other competing currencies.

• The weakening rupee presents a problem because of the USD/INR. It will lead to a whole host of other issues, primarily causing our import bill and trade deficit to balloon even further.

• While exporters will see some relief and gains, the pressure on imports is going to be immense.

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