Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

In Asia the market that still looks attractive is India’s Nifty as it trades near the trend highs. Previous examples of a rally and breakouts on the Nifty Index saw the market move more than 10% from the base. Since we started from a recent low of 15,513, we could expect at least 17,064 if not the 17,400 area before seeing a consolidation or a meaningful pullback.Such a move coupled with USDINR looking like it could make it to the base of the range - approximately 72.50 - would put the Nifty in USD terms at 240 which is still 7% above current levels.Indeed, it might even be in India’s interest to see a slightly stronger currency given the trade deficit and the rising Oil price.

In Asia the market that still looks attractive is India’s Nifty as it trades near the trend highs. Previous examples of a rally and breakouts on the Nifty Index saw the market move more than 10% from the base. Since we started from a recent low of 15,513, we could expect at least 17,064 if not the 17,400 area before seeing a consolidation or a meaningful pullback.Such a move coupled with USDINR looking like it could make it to the base of the range - approximately 72.50 - would put the Nifty in USD terms at 240 which is still 7% above current levels.Indeed, it might even be in India’s interest to see a slightly stronger currency given the trade deficit and the rising Oil price.

Technical Analysis

Over the past few months India has been horribly torn apart from the Delta variant of Covid-19. Back in May I thought there was a serious risk of a notable correction down in the equity market, but it never came. Since then we have seen<ul type="disc">
<li>A higher Oil price, </li>
<li>The IMF significantly downgrading India’s GDP forecast and</li>
<li>Renewed concerns of Covid spreading.</li>
</ul>Despite all that, India’s Nifty has not only failed to correct down (it simply went sideways for 7 weeks) but has now posted what looks like a clear bullish break to new highs, not only in INR terms but also in USD terms.With USDINR beginning to turn from the top of the ‘range’ - as it probably needs to given a barrel of Oil costs some 5,300 Rupees – the recent breaks look very good. Further gains in the stock market and Rupee seem very likely not only over the coming days but perhaps weeks. Charts and further details below…

Over the past few months India has been horribly torn apart from the Delta variant of Covid-19. Back in May I thought there was a serious risk of a notable correction down in the equity market, but it never came. Since then we have seen
A higher Oil price, 
The IMF significantly downgrading India’s GDP forecast and
Renewed concerns of Covid spreading.
Despite all that, India’s Nifty has not only failed to correct down (it simply went sideways for 7 weeks) but has now posted what looks like a clear bullish break to new highs, not only in INR terms but also in USD terms.With USDINR beginning to turn from the top of the ‘range’ - as it probably needs to given a barrel of Oil costs some 5,300 Rupees – the recent breaks look very good. Further gains in the stock market and Rupee seem very likely not only over the coming days but perhaps weeks. Charts and further details below…

The Nifty Index has made a fresh high today. However, for the foreign (non-Indian) investor, this is not yet realised as the currency has weakened over the past few weeks.Could this break be meaningful, and have we seen the worst in the short term for the Rupee?

The Nifty Index has made a fresh high today. However, for the foreign (non-Indian) investor, this is not yet realised as the currency has weakened over the past few weeks.Could this break be meaningful, and have we seen the worst in the short term for the Rupee? 

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

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<div>DXY – Call for a DXY ST top near 93/92.70 to lock in some gains and work into select USD shorts for a pullback to 91.50 with risk to 91, to add back to USD longs and resume the rise targeting 94.</div><div></div><div>Timing risk: Pullback sequence should take the form of an elevated choppy pullback.</div><div></div><div>Next phase of the USD rise needs the 10yr to bottom near 1.37% support and start a fresh up cycle in yields.</div>

DXY – Call for a DXY ST top near 93/92.70 to lock in some gains and work into select USD shorts for a pullback to 91.50 with risk to 91, to add back to USD longs and resume the rise targeting 94.Timing risk: Pullback sequence should take the form of an elevated choppy pullback.Next phase of the USD rise needs the 10yr to bottom near 1.37% support and start a fresh up cycle in yields.

Economist, Centennial Asia Advisors

Nicholas Chia

Economist

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

<ul style="list-style-type: square;">
<li>Core inflation leapt to a multi-year high in May, which is at odds with the desultory growth outlook and still-sizeable economic slack.</li>
<li>A closer examination of the inflation print suggests that lockdowns were partially responsible for rising prices. As they come off by July, this should provide some respite from stirring prices.</li>
<li>But that is not to say that prices will tail off sharply. Instead, other factors will keep prices pressures elevated – firm global goods inflation, Rupee <a href="https://www.smartkarma.com/entities/inr" target="_blank" data-smartkarma-citation="entities:22832:1" rel="noopener">INR (USDINR CURNCY)</a>  weakness, higher oil and CPO prices, etc. In turn, CPI inflation is more likely to remain tilted to the upper end of the RBI's target corridor (2%-6%).</li>
<li>This leaves the RBI in a pickle. If prices show no sign of moderating, the central bank will have to contemplate an earlier-than-envisaged tightening of monetary conditions from 4Q21.</li>
</ul>


Core inflation leapt to a multi-year high in May, which is at odds with the desultory growth outlook and still-sizeable economic slack.
A closer examination of the inflation print suggests that lockdowns were partially responsible for rising prices. As they come off by July, this should provide some respite from stirring prices.
But that is not to say that prices will tail off sharply. Instead, other factors will keep prices pressures elevated – firm global goods inflation, Rupee INR (USDINR CURNCY)  weakness, higher oil and CPO prices, etc. In turn, CPI inflation is more likely to remain tilted to the upper end of the RBI's target corridor (2%-6%).
This leaves the RBI in a pickle. If prices show no sign of moderating, the central bank will have to contemplate an earlier-than-envisaged tightening of monetary conditions from 4Q21.


India Inflation: More To It Than Meets The Eye

India

The Indian rupee is the official currency of India. 

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INR (USDINR CURNCY)

India Markets Refreshed

India's Nifty is still in an uptrend and looks even more attractive in USD terms as USDINR threatens to take out supports.

Shyam Devani

India: Breaks and Targets

The breaks seen on the Nifty Index as well as USDINR are notable points of interest. Here we look at where the potential targets are

Shyam Devani

Indian Markets: Breaks and Setups

The Nifty looks set to breakout as USDINR tops out. These charts suggest that the Nifty in USD terms could rise anywhere from 4.5% to 6% above...

Shyam Devani

USD Long Trim with Fresh Buy Levels

DXY – Call for a DXY ST top near 93/92.70 to lock in some gains and work into select USD shorts for a pullback to 91.50 with risk to 91, to add...

Thomas Schroeder

India Inflation: More To It Than Meets The Eye

inflation leapt to a 6-month high in May, which is at odds with the still-sizeable slack in demand. Supply-side dynamics were clearly at work, and...

Nicholas Chia

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