Indian Rupee, USD/INR, Nifty 50, Reserve Bank of India, RBI - Talking Points
- Indian Rupee flat, Nifty 50 gains after surprise RBI rate hold
- Governor Das highlighted the potential for near term inflation
- USD/INR ranging, Nifty 50 may invalidate a reversal signal
The Indian Rupee was unable to find much of a lift despite the Reserve Bank of India (RBI) unexpectedly leaving benchmark lending rates unchanged in August. The local 2-year government bond yield traded higher, touching its highest since the middle of June. Meanwhile, India’s benchmark Nifty 50 stock index traded higher ahead of a rosy Wall Street session.
The RBI repurchase and reverse repo rates held steady at 4.00% and 3.35% respectively. Economists were fairly split over whether or not the central bank could deliver further 25 basis point cuts. The possibility of near term inflation expectations may have been why the RBI hesitated to reduce borrowing costs. Governor Shaktikanta Das noted that there are inflation pressures evident across sub-groups.
Additional Comments from RBI Governor Shaktikanta Das:
- The MPC voted to continue an accommodative stance
- Global economic activity remains fragile
- Portfolio flows into emerging markets have resumed
- Indian economic activity has started to recover
- Supply chain disruptions are still there
- More favorable food inflation may emerge
- Consumer confidence turned pessimistic in July
- Space for further policy action is available
- Shadow lenders have access to funding at reasonable cost
- The aim is to improve flow of credit
Inflation is anticipated to stay elevated until September before easing, and hopes for further stimulus down the road may have kept the Nifty afloat. In addition, the RBI gave the green light for banks to restructure debt for certain borrowers. It allows them to extend moratoriums on loan repayments for up to two years. An additional special liquidity facility of INR100 billion was planned for NABARD and NHB, key banks.
Compared to some of its counterparts, the Indian Rupee hasn’t been able to find as much meaningful upside progress against the US Dollar as of late. This is as Asia’s third-largest economy remains the third most-impacted nation by the coronavirus outbreak. Indian fiscal-2021 real GDP growth is expected to be negative for the first time in over 40 years. From here, USD/INR is eyeing local industrial production and CPI data next week while also keeping a tab on external risks that may influence market mood.
Indian Rupee Technical Analysis
USD/INR remains in range-bound trade since prices found a low in June. That point also very closely aligns with the 2018 high at 74.48. Key resistance sits above as a range between 75.37 and 75.52. In the middle, there is the 74.94 – 75.07 inflection range which has its beginnings from April. A daily close under the 2018 high could open the door to resuming the top from April.
USD/INR Daily Chart
USD/INR Chart Created in TradingView
Nifty 50 Technical Analysis
The Nifty 50 remains in an uptrend after prices were unable to push under rising support from March’s bottom. In fact, the index may be on the verge of retesting a key resistance zone between 11317 and 11433 which could invalidate the Bearish Harami candlestick pattern. Otherwise, a daily close under the rising trend line could open the door to a reversal, exposing support at 10553.
Nifty 50 Daily Chart
Nifty 50 Chart Created in TradingView
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
https://www.tradingview.com/symbols/NIFTY/?exchange=FX_IDC
