The Hindu Business Line : Rupee nears key resistance

The impending Lok Sabha election results, due this Saturday, is not causing any consternation to the rupee. The currency continued to trade strong against the dollar helped by some robust portfolio inflows into the country. Foreign institutional investors have infused more than $1 billion into the Indian stock markets thus far in May. One-month rupee forwards traded on the non-deliverable forward market reflect a positive bias in the rupee outlook.

Dollar weakened as global equity markets surged higher last week. But the slide was stemmed once funds started flowing into safe-haven assets again this week as equities reversed their winning ways. Dollar index reversed higher from a low of 82.4.

One-month view

Rupee is in a medium term uptrend since the trough of 52.1 recorded on March 3. The third leg of this up-move appears to have begun on April 28. This move has the targets of 48.8 and 48.3. Rupee is testing the first target over the past week. A strong close above 48.8 would make the rally continue to 48.3. The positive medium-term view will be mitigated only on a close below 51.

It, however, needs to be remembered that rupee has long-term resistance around 48. If the current rally halts at this level, a range-bound move between 48 and 52 can ensue for a few months. Long-term target above 48 is 47.

Five-day view

Short-term outlook for the rupee also continues to be up. But the currency faces strong resistance around 48.8. If the rupee is unable to penetrate this level, it can move between 49 and 50 for a few more sessions. Key supports for the short-term are at 49.6 and 50.

Close above 48.8 will usher in a rally to 48.6 or 48.1

Supports – 49.6, 50, 50.3

Resistances – 48.9, 48.6, 48.3

Lokeshwarri S.K.

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