Quick look at the India economic data

Let's quickly run through some of the things I picked up over the last week

Release of H2 Balance of Payment data

1. India reported a BoP deficit of $ 30.38 bn for Q2 ( $ 4.6 bn surplus for Q1). H1 BoP is at $ 25.78 bn.

Current account = Merchandise + Invisibles ( Services + Transfers + Income)

= - 147 + 92 ( 65 + 48 - 21 )

= - 55 bn $

Capital Account = Foreign Investment + Loans + Banking Capital + Rupee Debt Service + Other Capital

= 12 + 9 + 11 + 0 - 3

= + 29 bn $

BoP = Current account + Capital account = $ 26 bn

As on 01 April 2022, FX Reserves stood at $ 606 bn. Reserves fell to $ 533 bn as at end of September. Change in Fx Reserves of $ 73 bn during this period could be explained as $ 26 bn of RBI intervention and the balance could as valuation swings.

This nicely ties up with the comments from RBI Governor Shaktikanta Das earlier post the Sept policy, "about 67 per cent of the decline in reserves during the current financial year is due to valuation changes arising from an appreciating US dollar and higher US bond yields".

2. Release of PMI Data for December

Mfg PMI rose to 57.8 (prior 55.7) marking 18 consecutive months of expansion. Cost pressures were muted, with the rate of inflation little-changed and the second-slowest since September 2020. On the other hand, selling price inflation outpaced that seen for input costs for the first time in near 2-1/2 years.*

Services PMI rose to 58.5 (prior 56.40). Input cost inflation accelerated and was above its long-run average, amid higher prices for energy, food, transportation, and wage costs. Meanwhile, output cost inflation slowed, but remained solid and historically elevated.*

3. Oil prices have come off sharply in the last 2 days weighed down by risk of global growth slowdown amid financial tightening and rising covid cases in China. Also comments by IMF chief Georgieva added to the downcast outlook. He said one-third of the global economy will be hit by recession this year, and 2023 will likely be tougher for the world economy than the previous 12 months. Brent crude oil prices touched a high of $ 86.96 per barrel yesterday and traded under $ 78 per barrel today.

USDINR continues to be in the 82.60 - 83.00 range. I love consolidation plays as longer the consolidation period, more explosive the move is outside the range. When one sees consolidation at the top of the trading range (80.50 - 83.00), it is favorable to short the pair at the top of the range. Current consolidation spans 14 trading days (82.60 - 83.00). The key to good execution is to deal with break on either side of the range ruthlessly.

I have been writing for the past few times, sell at the top of the range with tight stop above 83.00 for intraday play and 83.30 for strategic plays for a move lower. Add to shorts on break below 82.50 and hold position if 82.50 breaks on a closing basis.

Apologies for the long absence, I have been travelling myself and hence blog activity is muted. Generally, markets are extremely slow in the last week of December as foreign banks close their books of accounts and global transaction volumes drop on Christmas holiday. So what better time than now to take a break :)

*source - trading economics

Comments

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