Posts Tagged ‘Indian rupee


Currency Options USDINR: December series

November series for USDINR options expired on 29th November as expected. In last week of November, Rupee made a dash towards 56. I don’t have a large position on either side in this series.

Given stalemate on US fiscal cliff situation, INR remains vulnerable to any global risk off trade in December last week. On the other side, Government of India (GoI) has become proactive on reforms front. If GoI is able to pass increase in FDI limit in insurance & pension, Banking act in last week of winter session of parliament, then Rupee should find support and even rally. Last week, GoI passed Land acquisition bill, Cabinet committee on Investment board (watered down version of National Investment Board) under PM. SP & BSP, who had supported GoI on FDI vote in retail (direct and indirect), are at loggerheads in Parliament on reservation in promotion for SC/ST. Government will find it tough to pass anything in Parliament on account of this logjam. On 18th December, I don’t expect RBI to cut interest rates. There might be 25 bps cut in CRR, but not in repo rate.

Last week of December should be a good time to build some position for January series. I don’t expect Rupee to breach its previous low of 57.37 in December & January.


Currency Options USDINR: November series

October series for USDINR currency options will expire on Monday. If nothing unexpected happens on Monday, I expect all my sold call & put options to expire worthless. Sold call options strike ranged from 55.5-58 and sold put options ranged from 50-51.5. Call options sold were naked options but put options were ratio spreads (For every bought 52 put, I had sold 10 lots of 50-51.5 puts).

November series should be tough as compared to October series. It is one of the longest series of the year in terms of number of days. There are a lot of important events in November, which if panned out adversely can put pressure on Rupee. Euro has come down from high of 1.32 to 1.29 in recent weeks. On 31st October, RBI will announce its decision on policy rate cut. RBI is under lot of pressure from the Government and Industry to reduce policy rates. 25 bps CRR cut is at least expected from RBI but repo rate cut will boost Rupee.

US markets have been correcting recently on account of below par quarterly results. After US presidential elections in first week of November, focus will shift to safe resolution of fiscal cliff issue. There might be some be some political posturing and dithering on the issue, but eventually it will pass. More the issue lingers on, world markets will be nervous.

Some more positive action from government on policy front issue will be positive for markets. Passage of NIB (National Investment Board – single window clearance for mega projects mooted by PM) will be big positive in that light. Winter session of parliament will also start in November and I don’t expect anything meaningful from that. This session should pan out more or less in similar manner as last session.

Given all this I have started selling OTM calls for November series. I don’t expect big crack in Rupee on downside. It seems that RBI has bought some dollars around 52 levels in October ( I haven’t sold any puts  till now. It’s wait and watch approach on put side.


Currency options USDINR: October series

September series for USDINR currency options expired yesterday. In my previous post, I had mentioned that I don’t expect Rupee to breach 56 in September series. All my sold OTM call options expired worthless.

But the biggest surprise of last series was UPA2 government awakening from slumber and its action on diesel price rise, FDI in retail and aviation. Frankly, I have been surprised positively  by bold measures announced by Congress led government. But one thing is pretty clear now, for short term (next 3 months), government action has removed tail risk of India’s sovereign credit rating downgrade. Sentiments have become positive and Rupee has moved sharply from 55+ levels to 53.5 in last 2 weeks. Indian Rupee being high beta EM currency has benefited from QE3. As usual some analysts have come out with ridiculous levels on rupee appreciation. Targets around 48-50 are being talked about. Same analysts had given Rupee targets of 60+ on downside when it was 56-57. It’s a clear case of overshooting on both downside and upside.

Today, the government will announce its borrowing plan for H2 (October-March) of this year. It will be an important cue in terms of Rupee pace of appreciation. In case market is disappointed then Rupee will find it tough to cross 53 on upside. On downside also, I think 55-55.50 should hold out in October series. Broad range for Rupee this series should be 52-55 unless some black swan event happens in Euro-zone. I think breach of 51.5-52 level would be difficult in this series. I have sold a lot of OTM calls for October series.


Currency options USDINR: September series

US Fed has refrained from announcing unconventional measures (QE3) to prop up slow recovery of US economy and high unemployment rate. Fed chairman, Ben Bernanke statement from Jackson hole was similar to August meet statement. They are ready to act as and when needed but avoided on giving exact timelines. Risk assets have rallied in anticipation of QE3. Euro has also rallied in recent months to 1.265 odd levels. Euro has risen also on hopes of action from ECB in its September 6 meet. Last month, ECB President Mario Draghi statement of “whatever it takes” has also supported EU common currency. Some measures are also expected from ECB in its September 6 meet.

Rupee, which is tracking Euro and higher FII inflows in August has stabilized around 55-56 levels. There is also hope from Indian government on reform front. Although, those hopes are receding fast and it looks difficult to me that congress government will announce any reform measures. Given all these factors I don’t think Indian Rupee will breach 56 in September series also. I have sold USDINR OTM calls of current series. There are downgrade fears of India’s sovereign rating by rating agencies. I think downgrade fears are very real and a couple of months of more inaction on the part of government might prompt rating agencies. It goes without saying that downgrade will be catastrophic for Indian currency and Indian equity markets in short-term.


Soniaji presents UPA-2 achievements and Rupee hitting fresh new lows..

Rupee at a fresh new lifetime low kind of sums up congress led UPA 2 rule at center. PM and FM keep on harping about challenging global macroeconomic environment which is resulting sharp Rupee decline. Every time we hear the same reason – Eurozone crisis is impacting our growth. Yes, to a large extent Eurozone troubles are impacting all EM currencies. But INR is outperforming every other currency on downside on account of twin deficits. Without any major shock and FII outflows, Rupee is above 56.

It is difficult to believe that a man of  such stature is doing nothing but just holding onto his PM post. May be the center of power is somewhere else and he has no choice but to be a rubber stamp. Few days ago, PM commented that “Policy paralysis perception can be corrected by reality”. I wonder if he is still in real world or in the paralyzed world of congress. Sometime back,  Soniaji also commented that it is fashionable to criticize government. It just shows the state of mind this government. Intellectuals at the center are still not willing to accept that much of India’s misery is a result of our own doings rather than the outside world. Suddenly after parliament session got over, the government increased petrol prices sharply by Rs. 7.5/Lt. Everybody including myself thought that the center has become hyperactive and we might see slew of decisions in coming days, especially diesel, LPG and kerosene price hike.  But everything is back to normal in the paralyzed world. Petrol is to a large extent deregulated and its subsidy share is like a drop in the ocean of overall subsidy bill. Petrol hike should have been managed better in terms of its quantum and rather diesel, LPG and kerosene prices should have been hiked moderately. But now the government has shot itself in the foot and is finding difficult to increase prices.

Rajeev Malik wrote an article in BS: It kind of sums up the frustration with this government.


Infosys flat Q4 guidance drag stock sharply down

Infosys declared its Q3 FY12 results today. As expected, results were good on account of Rupee depreciation. Its Q3 revenues were Rs 9298 crore and Q3 bottom-line was Rs 2372 crore. EPS for Q3 was 41.51  versus 38.51-39.2 guidance. EBIT margins were 31.17% versus 28.16% for Q2. Overall Q3 numbers were good on most parameters. Q3 performance allowed the IT giant to increase FY12 EPS guidance to Rs 147.13 versus Rs 143.02-145.26 earlier.

Key problem was with the FY12 dollar revenue guidance to 16.4% versus 17.1 -19.1% growth earlier guidance. This guidance factors in flat Q4 revenue growth QoQ. It looks like Infosys management has given extremely conservative guidance to tone down market bullish expectations. But it acted as big dampener and stock closed down 8.4%. It will take some time for Infosys stock to stabilize and move higher. I was active today in selling OTM calls. If stock falls sharply further from these levels then I would be a buyer.

July 2018
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