INR opens flat at 72.07 and today may test another imp level of 72.25 and then 72.45. The recent weakness is coming because of fiscal concerns, plummeting tax collections, drop in IIP and increase in CPI ( yest it came at 15 month high of 4.66%) and projected drop in GDP growth rate ( market now expecting it to be about 4%). The GDP data release date is still a few days ahead. What is intriguing is that RBI intervention has been relatively muted to protect INR weakness.
Globally also sentiment is “ risk off” as growth slowing down in most developed markets and fresh tensions in Hong Kong
We think the current uptick may extend INR to about 72.75 in coming days and it would then consolidate between 71.80 and 72.80
We suggest to cover near term ( about a week) imports using forwards and slightly longer term using plain call options. Long term export hedging could be considered around 72.50-72.80.