Follow The Rupee

A weak rupee and likelihood of widening of current account deficit, what should one expect from the market? Well a positive payroll data has kept the markets dancing in Asia. The positive sentiment is likely to be passed on to the Indian markets as well so one can expect a positive opening today. The Rupee now at its historic lows however may cut the gains if it breaches the earlier lows.

Earlier in the morning, Nikkei has surged by more than 3% on the back of the robust Japanese GDP numbers. The weak Yen has also supported the up move in the index. Japan’s January to March quarter GDP rose by 1% from December quarter GDP numbers. The data also confirms the economic recovery which is likely to sustain on the back of the monetary stimulus announced by Japan’s central bank.

On Friday, the US May payroll data came in positive as total 175000 jobs were added in the economy. The unemployment rate in USA however has increased by nearly 50 basis points to 7.6 per cent. The UBS Securities however has said that the numbers were in line with expectations and sees a GDP growth rate of 2-3 percent going ahead. On the back of this data, the US markets gained more than 1% on Friday. The sentiment in the European markets was also buoyant as all of them closed with more than 1% gains.

On the domestic grounds, the economists had turned very optimistic on the Indian economy as key commodities lost its sheen this year. The weakening of the rupee and huge rise in the gold imports however has put pressure on the trade deficit. The current account deficit which is a key number for the markets is likely to come way above the earlier estimates due to the changed dynamics. The traders and the economists are now of opinion that the rupee will further remain under pressure. This has also prompted FIIs to sell Indian debt securities worth Rs 7600 crore in the last week. This is exactly that is worries the markets. Will they also sell the equities? Again to dampen the sentiment the manufacturing PMI numbers last week were not up to the mark.

While the concerns are there how the day looks at this time? The SGX Nifty has stated the day with positively meaning that the Indian equities may well start the day in positive. The course of the day however seems dependent on the rupee direction.