Portfolio

Rupee might witness some buying today

Akhil Nallamuthu, BL Research Bureau | Updated on November 15, 2019 Published on November 15, 2019

 

On Thursday, the rupee after opening flat at 72.06, weakened to make an intraday low of 72.24 against the dollar during the initial hour of trade. But then it rallied to make an intraday high of 71.86 before ending the session at 71.97. Thus, the rupee has managed to close above 72.

The price band between 72.3 and 72.44 will act as a considerable support for the Indian currency. Hence, the prevailing bearish trend might start losing its momentum and this price band can arrest further deprecation. If the rupee continues to recover today, it will face resistance at 71.6 and 71.4.

The Wholesale Price Index (WPI) data released on Thursday gave a different picture from that of the Consumer Price Index (CPI). Whereas the CPI rose above the RBI targeted level to 4.62 per cent for October, the WPI increased by a meager 0.16 per cent for the same month. This is significantly lower than 5.54 per cent recorded in the corresponding month of the previous year; also lower compared to previous month’s 0.33 per cent. The drag in the index was mainly due to fuel and power, but acceleration in vegetable prices, especially onion price, managed to keep it from potentially slipping into a negative rate.

The difference between the CPI and WPI is because of the weights used in calculating the index. “Food and beverages” have more weightage in CPI whereas “Manufactured products” have more weightage in the WPI. Hence, until food inflation stays higher the gap between the CPI and the WPI is expected to be higher. Such a deviation could pose a difficult scenario for the RBI to decide on the interest rate path.

The dollar index depreciated yesterday from its upper boundary of the range at 98.5 and is currently trading at critical support of 98. The 50-day moving average also lies at the same level. If the index break below this level, it could decline to 97.67. On the upside, 98.5 is acting a stiff resistance.

Considering the factors that the dollar is currently trading with a bearish bias and the rupee is near a strong support band, one can be cautiously bullish on the Indian currency on intraday basis. Traders can go long in rupee with a tight stop-loss.

Supports: 72.3 and 72.44

Resistances: 71.4 and 71.6

Published on November 15, 2019
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