USDINR May: The market closed firm yesterday after taking support at 45.16 levels. As long as the support holds, correction is less likely. The resistance is seen 45.45 levels. The break
below 45.16 will confirm a correction towards 45.05 levels in the short term.
EURINR May: The market is expected to trade firm today as long as it holds the support of 63.90 for intraday. The resistance is seen at 64.20-64.25 levels. Prefer to buy on dips around
63.95-64.00 for a target of the resistance with stoploss below 63.85.
JPYINR May: Market if holds below 55.35-55.40 range, should stay weak for the session. The immediate support is seen at 55.15 and then 55.00 levels. We recommend selling on a
pullback towards 55.40 levels for intraday.
Thursday, May 26, 2011
Rupee depreciated, EU raised 4.75 billion euros ($6.7 billion) for Portugal
The Indian rupee fell over three-month low v/s the U.S. dollar as concerns over Greece's sovereign
debt problems continued to lead risk aversion. The USDINR May future on MCXSX rose to 45.45, to
finally settle at 45.3575. The BSE benchmark SENSEX fell 164.73 points, or 0.9%, to close at
17,847.24. The gain in US dollar till the early session pressurized the Indian rupee which had
pushed the USDINR May future contract to 45.45, however later fell marginally on correction in US
dollar from the European session. In cross pairs, the EURINR May future gained later to close at
63.81, up 10 paisa. The GBPINR rose 56 paisa to close at 73.6050. the Yen traded stable v/s the
Indian rupee with JPYINR May future closed the session at 55.26, unchanged from previous closing.
In the overnight market, EURUSD remained stable to close at 1.4081 and currently heading higher
in Asia to trade around 1.4158 levels. The GBPUSD has been advancing further after a firm close at
1.6272 in New York trading and currently at 1.6320 in Asia.
In recent news, the EU raised 4.75 billion euros ($6.7 billion) for Portugal in a new bond issue
Wednesday, while the IMF gave its first tranche of emergency funding as part of a joint 78-billioneuro
bailout. The European Union funds will be delivered to Portugal on June 1, the European
Commission said, the day after a first bond issue raised 1.75 billion euros for Lisbon and 3.0 billion
euros for Ireland, another bailed out euro zone nation. Euro zone states are providing another third
through the European Financial Stability Facility, which was created last year to prop up economies
in trouble after a huge bailout for Greece. It has supported Euro today to push the EURUSD higher
to 1.4150 from 1.4080 in New York and expected to keep the positive momentum going during the
Asian market.
The US is due to release its GDP data for 1st quarter which is expected to read at 2.2% from 1.8%
earlier. A better than expected US GDP is likely to push the US dollar higher as market feels it will
be a better proposition for Fed to close the QE in June.
debt problems continued to lead risk aversion. The USDINR May future on MCXSX rose to 45.45, to
finally settle at 45.3575. The BSE benchmark SENSEX fell 164.73 points, or 0.9%, to close at
17,847.24. The gain in US dollar till the early session pressurized the Indian rupee which had
pushed the USDINR May future contract to 45.45, however later fell marginally on correction in US
dollar from the European session. In cross pairs, the EURINR May future gained later to close at
63.81, up 10 paisa. The GBPINR rose 56 paisa to close at 73.6050. the Yen traded stable v/s the
Indian rupee with JPYINR May future closed the session at 55.26, unchanged from previous closing.
In the overnight market, EURUSD remained stable to close at 1.4081 and currently heading higher
in Asia to trade around 1.4158 levels. The GBPUSD has been advancing further after a firm close at
1.6272 in New York trading and currently at 1.6320 in Asia.
In recent news, the EU raised 4.75 billion euros ($6.7 billion) for Portugal in a new bond issue
Wednesday, while the IMF gave its first tranche of emergency funding as part of a joint 78-billioneuro
bailout. The European Union funds will be delivered to Portugal on June 1, the European
Commission said, the day after a first bond issue raised 1.75 billion euros for Lisbon and 3.0 billion
euros for Ireland, another bailed out euro zone nation. Euro zone states are providing another third
through the European Financial Stability Facility, which was created last year to prop up economies
in trouble after a huge bailout for Greece. It has supported Euro today to push the EURUSD higher
to 1.4150 from 1.4080 in New York and expected to keep the positive momentum going during the
Asian market.
The US is due to release its GDP data for 1st quarter which is expected to read at 2.2% from 1.8%
earlier. A better than expected US GDP is likely to push the US dollar higher as market feels it will
be a better proposition for Fed to close the QE in June.
Tuesday, May 24, 2011
Forex markets : Intraday Outlook and Strategy
The Indian rupee hit its weakest level in more than two months on Monday pressured by weakness in local equities along with US dollar pullback. The immediate expiry May contract closed at 45.29, after posting an intraday high of 45.36.
| Symbol | Series/Expiry | Open | High | Low | Close | Chg | % Chg | OI | Vol |
| USDINR | 27-May-2011 | 45.1500 | 45.3625 | 45.1175 | 45.2975 | 0.2500 | 0.55% | 634,252 | 3,599,910 |
| USDINR | 28-Jun-2011 | 45.3500 | 45.5675 | 45.3100 | 45.5050 | 0.2300 | 0.51% | 198,054 | 213,011 |
| EURINR | 27-May-2011 | 63.6900 | 63.7800 | 63.3625 | 63.4650 | -0.6700 | -1.04% | 39,206 | 144,232 |
| EURINR | 28-Jun-2011 | 64.0000 | 64.1500 | 63.6300 | 63.7125 | -0.6900 | -1.07% | 20,683 | 24,750 |
| GBPINR | 27-May-2011 | 73.1000 | 73.3750 | 73.0050 | 73.0600 | -0.0450 | -0.06% | 7,088 | 26,288 |
| GBPINR | 28-Jun-2011 | 73.3000 | 73.6625 | 73.3000 | 73.3400 | -0.0775 | -0.11% | 2,971 | 4,064 |
| JPYINR | 27-May-2011 | 55.0100 | 55.7025 | 55.0100 | 55.3375 | 0.1925 | 0.35% | 8,602 | 34,389 |
| JPYINR | 28-Jun-2011 | 55.3000 | 55.9100 | 55.3000 | 55.5775 | 0.1950 | 0.35% | 4,481 | 8,309 |
Indian equities tracked the biggest drop in Asian stocks in two months after Fitch Ratings lowered Greece’s credit rating and Standard and Poor’s (S&P) said Italy’s rating was at risk. The S&P CNX Nifty on the National Stock Exchange lost 1.8% to 5,386.55. The Sensex closed at 17993.33, down 1.82%.
The Euro dropped tracking decline in equities and commodities which pulled down EURUSD below the 1.40 mark during mid European session. The EURINR May future contract lost 1.04% or 67 paisa on Monday to close at 63,46. However, the GBPINR remained flat with slight downside bias despite decline in GBPUSD, as USDINR rose over half a percent
In Asian currencies, the Yen fell to a low of 55,01The Sensex closed at 17993.33, down 1.82%. v/s the Indian rupee however covered some lost ground taking support from USDINR. The JPYINR May future contract closed the session up 0.355 at 55.3375.
Euro sentiment has been turning bearish now and in the overnight market the EURUSD remained lower. In Asia today it is currently trading above 1.40 mark. A further drop could come as more hedge funds and speculative investors unwind pro-euro bets. These have been cut rapidly, according to CFTC data. Long euro positions fell to $7.4 billion as of May 17, down from $18.4 billion two weeks earlier.
Intraday Outlook
USDINR May contract is likely to find stiff resistance at 45.35 levels and if market fails to break and sustain above the same then we may see correction towards 45.15 and then towards 45.05 levels. For intraday, we see sideways to lower move in USDINR
The EURINR contract may see good support at 63.30 levels and if the level is maintained then pullback is possible. Resistance is seen at 63.65 levels and breach of the same may head recovery towards 63.80 levels.
In case of Pound the May GBPINR contract is likely to take resistance at 73.00 levels and market sustains below the same should stay weak for the session. The support is seen at 72.65 and then 72.50 levels.
Wednesday, May 18, 2011
Commodity Derivates
The origin of derivatives can be traced back to the need of farmers to protect themselves
against fluctuations in the price of their crop. From the time of sowing to the time of crop
harvest, farmers would face price uncertainty. Through the use of simple derivative products,
it was possible for the farmer to partially or fully transfer price risks by locking-in asset prices.
These were simple contracts developed to meet the needs of farmers and were basically a
means of reducing risk.
A farmer who sowed his crop in June faced uncertainty over the price he would receive for his
harvest in September. In years of scarcity, he would probably obtain attractive prices. However,
during times of oversupply, he would have to dispose off his harvest at a very low price.
Clearly this meant that the farmer and his family were exposed to a high risk of price uncertainty.
On the other hand, a merchant with an ongoing requirement of grains too would face a price
risk - that of having to pay exorbitant prices during dearth, although favourable prices could
be obtained during periods of oversupply. Under such circumstances, it clearly made sense for
the farmer and the merchant to come together and enter into a contract whereby the price of
the grain to be delivered in September could be decided earlier. What they would then negotiate
happened to be a futures-type contract, which would enable both parties to eliminate the price
risk.
In 1848, the Chicago Board of Trade (CBOT) was established to bring farmers and merchants
together. A group of traders got together and created the `to-arrive' contract that permitted
farmers to lock in to price upfront and deliver the grain later. These to-arrive contracts proved
useful as a device for hedging and speculation on price changes. These were eventually
standardised, and in 1925 the first futures clearing house came into existence.
Today, derivative contracts exist on a variety of commodities such as corn, pepper, cotton,
wheat, silver, etc. Besides commodities, derivatives contracts also exist on a lot of financial
underlying like stocks, interest rate, exchange rate, etc.
A derivative is a product whose value is derived from the value of one or more underlying
variables or assets in a contractual manner. The underlying asset can be equity, forex, commodity
or any other asset. In our earlier discussion, we saw that wheat farmers may wish to sell their
harvest at a future date to eliminate the risk of a change in prices by that date. Such a
transaction is an example of a derivative. The price of this derivative is driven by the spot price
of wheat which is the 'underlying' in this case.
7
The Forward Contracts (Regulation) Act, 1952, regulates the forward/ futures contracts in
commodities all over India. As per this Act, the Forward Markets Commission (FMC) continues
to have jurisdiction over commodity forward/ futures contracts. However, when derivatives
trading in securities was introduced in 2001, the term 'security' in the Securities Contracts
(Regulation) Act, 1956 (SC(R)A), was amended to include derivative contracts in securities.
Consequently, regulation of derivatives came under the purview of Securities Exchange Board
of India (SEBI). We thus have separate regulatory authorities for securities and commodity
derivative markets.
Derivatives are securities under the SC(R)A and hence the trading of derivatives is governed
by the regulatory framework under the SC(R)A. The Securities Contracts (Regulation) Act,
1956 defines 'derivative' to include -
1. A security derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument or contract for differences or any other form of security.
2. A contract which derives its value from the prices, or index of prices, of underlying
securities.
Derivative contracts are of different types. The most common ones are forwards, futures,
options and swaps. Participants who trade in the derivatives market can be classified under
the following three broad categories: hedgers, speculators, and arbitragers.
1. Hedgers: The farmer's example that we discussed about was a case of hedging.
Hedgers face risk associated with the price of an asset. They use the futures or options
markets to reduce or eliminate this risk.
2. Speculators: Speculators are participants who wish to bet on future movements in
the price of an asset. Futures and options contracts can give them leverage; that is, by
putting in small amounts of money upfront, they can take large positions on the market.
As a result of this leveraged speculative position, they increase the potential for large
gains as well as large losses.
3. Arbitragers: Arbitragers work at making profits by taking advantage of discrepancy
between prices of the same product across different markets. If, for example, they see
the futures price of an asset getting out of line with the cash price, they would take
offsetting positions in the two markets to lock in the profit.
Whether the underlying asset is a commodity or a financial asset, derivatives market performs
a number of economic functions.
8
• Prices in an organised derivatives market reflect the perception of market participants
about the future and lead the prices of underlying to the perceived future level. The
prices of derivatives converge with the prices of the underlying at the expiration of the
derivative contract. Thus, derivatives help in discovery of future as well as current
prices.
• The derivatives market helps to transfer risks from those who have them but may not
like them to those who have an appetite for them.
• Derivatives, due to their inherent nature, are linked to the underlying cash markets.
With the introduction of derivatives the underlying market witnesses higher trading
volumes, because of participation by more players who would not otherwise participate
for lack of an arrangement to transfer risk.
• Speculative traders shift to a more controlled environment of the derivatives market.
In the absence of an organised derivatives market, speculators trade in the underlying
cash markets. Margining, monitoring and surveillance of the activities of various
participants become extremely difficult in these kinds of mixed markets.
• An important incidental benefit that flows from derivatives trading is that it acts as a
catalyst for new entrepreneurial activity. Derivatives have a history of attracting many
bright, creative, well-educated people with an entrepreneurial attitude. They often
energize others to create new businesses, new products and new employment
opportunities, the benefit of which are immense.
• Derivatives markets help increase savings and investment in the long run. The transfer
of risk enables market participants to expand their volume of activity.
Derivatives markets can broadly be classified as commodity derivatives market and financial
derivatives markets. As the name suggest, commodity derivatives markets trade contracts are
those for which the underlying asset is a commodity. It can be an agricultural commodity like
wheat, soybeans, rapeseed, cotton, etc or precious metals like gold, silver, etc. or energy
products like crude oil, natural gas, coal, electricity etc. Financial derivatives markets trade
contracts have a financial asset or variable as the underlying. The more popular financial
derivatives are those which have equity, interest rates and exchange rates as the underlying.
The most commonly used derivatives contracts are forwards, futures and options
against fluctuations in the price of their crop. From the time of sowing to the time of crop
harvest, farmers would face price uncertainty. Through the use of simple derivative products,
it was possible for the farmer to partially or fully transfer price risks by locking-in asset prices.
These were simple contracts developed to meet the needs of farmers and were basically a
means of reducing risk.
A farmer who sowed his crop in June faced uncertainty over the price he would receive for his
harvest in September. In years of scarcity, he would probably obtain attractive prices. However,
during times of oversupply, he would have to dispose off his harvest at a very low price.
Clearly this meant that the farmer and his family were exposed to a high risk of price uncertainty.
On the other hand, a merchant with an ongoing requirement of grains too would face a price
risk - that of having to pay exorbitant prices during dearth, although favourable prices could
be obtained during periods of oversupply. Under such circumstances, it clearly made sense for
the farmer and the merchant to come together and enter into a contract whereby the price of
the grain to be delivered in September could be decided earlier. What they would then negotiate
happened to be a futures-type contract, which would enable both parties to eliminate the price
risk.
In 1848, the Chicago Board of Trade (CBOT) was established to bring farmers and merchants
together. A group of traders got together and created the `to-arrive' contract that permitted
farmers to lock in to price upfront and deliver the grain later. These to-arrive contracts proved
useful as a device for hedging and speculation on price changes. These were eventually
standardised, and in 1925 the first futures clearing house came into existence.
Today, derivative contracts exist on a variety of commodities such as corn, pepper, cotton,
wheat, silver, etc. Besides commodities, derivatives contracts also exist on a lot of financial
underlying like stocks, interest rate, exchange rate, etc.
A derivative is a product whose value is derived from the value of one or more underlying
variables or assets in a contractual manner. The underlying asset can be equity, forex, commodity
or any other asset. In our earlier discussion, we saw that wheat farmers may wish to sell their
harvest at a future date to eliminate the risk of a change in prices by that date. Such a
transaction is an example of a derivative. The price of this derivative is driven by the spot price
of wheat which is the 'underlying' in this case.
7
The Forward Contracts (Regulation) Act, 1952, regulates the forward/ futures contracts in
commodities all over India. As per this Act, the Forward Markets Commission (FMC) continues
to have jurisdiction over commodity forward/ futures contracts. However, when derivatives
trading in securities was introduced in 2001, the term 'security' in the Securities Contracts
(Regulation) Act, 1956 (SC(R)A), was amended to include derivative contracts in securities.
Consequently, regulation of derivatives came under the purview of Securities Exchange Board
of India (SEBI). We thus have separate regulatory authorities for securities and commodity
derivative markets.
Derivatives are securities under the SC(R)A and hence the trading of derivatives is governed
by the regulatory framework under the SC(R)A. The Securities Contracts (Regulation) Act,
1956 defines 'derivative' to include -
1. A security derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument or contract for differences or any other form of security.
2. A contract which derives its value from the prices, or index of prices, of underlying
securities.
Derivative contracts are of different types. The most common ones are forwards, futures,
options and swaps. Participants who trade in the derivatives market can be classified under
the following three broad categories: hedgers, speculators, and arbitragers.
1. Hedgers: The farmer's example that we discussed about was a case of hedging.
Hedgers face risk associated with the price of an asset. They use the futures or options
markets to reduce or eliminate this risk.
2. Speculators: Speculators are participants who wish to bet on future movements in
the price of an asset. Futures and options contracts can give them leverage; that is, by
putting in small amounts of money upfront, they can take large positions on the market.
As a result of this leveraged speculative position, they increase the potential for large
gains as well as large losses.
3. Arbitragers: Arbitragers work at making profits by taking advantage of discrepancy
between prices of the same product across different markets. If, for example, they see
the futures price of an asset getting out of line with the cash price, they would take
offsetting positions in the two markets to lock in the profit.
Whether the underlying asset is a commodity or a financial asset, derivatives market performs
a number of economic functions.
8
• Prices in an organised derivatives market reflect the perception of market participants
about the future and lead the prices of underlying to the perceived future level. The
prices of derivatives converge with the prices of the underlying at the expiration of the
derivative contract. Thus, derivatives help in discovery of future as well as current
prices.
• The derivatives market helps to transfer risks from those who have them but may not
like them to those who have an appetite for them.
• Derivatives, due to their inherent nature, are linked to the underlying cash markets.
With the introduction of derivatives the underlying market witnesses higher trading
volumes, because of participation by more players who would not otherwise participate
for lack of an arrangement to transfer risk.
• Speculative traders shift to a more controlled environment of the derivatives market.
In the absence of an organised derivatives market, speculators trade in the underlying
cash markets. Margining, monitoring and surveillance of the activities of various
participants become extremely difficult in these kinds of mixed markets.
• An important incidental benefit that flows from derivatives trading is that it acts as a
catalyst for new entrepreneurial activity. Derivatives have a history of attracting many
bright, creative, well-educated people with an entrepreneurial attitude. They often
energize others to create new businesses, new products and new employment
opportunities, the benefit of which are immense.
• Derivatives markets help increase savings and investment in the long run. The transfer
of risk enables market participants to expand their volume of activity.
Derivatives markets can broadly be classified as commodity derivatives market and financial
derivatives markets. As the name suggest, commodity derivatives markets trade contracts are
those for which the underlying asset is a commodity. It can be an agricultural commodity like
wheat, soybeans, rapeseed, cotton, etc or precious metals like gold, silver, etc. or energy
products like crude oil, natural gas, coal, electricity etc. Financial derivatives markets trade
contracts have a financial asset or variable as the underlying. The more popular financial
derivatives are those which have equity, interest rates and exchange rates as the underlying.
The most commonly used derivatives contracts are forwards, futures and options
Currency market update
The Indian rupee fell on risk aversion on Monday tracking other high yielding currencies. The
dollar reached 45.16 rupees on Monday, compared to 44.87 on Friday. The greenback touched
an intraday high of 45.19 rupees, the highest level since March 17.FII have turned cautious
over the economy's growth prospects, with capital flowing out after the Reserve Bank of India
increased interest rates by a higher-than-anticipated 0.50% on 3rrd May. This has been
pressurizing Indian rupee after the RBI meeting while stocks dropped. The Indian foreignexchange
and bond markets are shut Tuesday for a religious holiday. The USDINR may open
lower
In global FX market on Tuesday, the Euro and GBP recovered after the EU meeting. EUR found
some positives from the noise out of the meeting with Portugal’s €78 bln rescue package
approved, with 1/3rd IMF backing, while other finance ministers called for more structural
reforms and extended repayment terms. Germany’s Merkel repeated that it is still not in
Germany’s interest for any member to leave the EU. The EURUSD is at 1.4278 and GBPUSD at
1.6278. There is a possibility of further recovery of European currencies today.
The BoE and FOMC minutes of the recent monetary policy meeting is due which is the major
theme for FX market today. BoE minutes should provide a better picture as to where the
committee stands on rates. MPC voters find themselves in a difficult position with regards to
agreeing to move on interest rates. Although recent data out of the UK continues to suggest
sluggish growth, pressure on the committee may mount as other European policy makers
remain focused on addressing high rising inflation.
The FOMC minutes released to be released today should give insight as to the Fed’s outlook
on interest rates as the $600B quantitative easing program is set to expire next month. US
dollar is trading flat before the FOMC minutes today.
dollar reached 45.16 rupees on Monday, compared to 44.87 on Friday. The greenback touched
an intraday high of 45.19 rupees, the highest level since March 17.FII have turned cautious
over the economy's growth prospects, with capital flowing out after the Reserve Bank of India
increased interest rates by a higher-than-anticipated 0.50% on 3rrd May. This has been
pressurizing Indian rupee after the RBI meeting while stocks dropped. The Indian foreignexchange
and bond markets are shut Tuesday for a religious holiday. The USDINR may open
lower
In global FX market on Tuesday, the Euro and GBP recovered after the EU meeting. EUR found
some positives from the noise out of the meeting with Portugal’s €78 bln rescue package
approved, with 1/3rd IMF backing, while other finance ministers called for more structural
reforms and extended repayment terms. Germany’s Merkel repeated that it is still not in
Germany’s interest for any member to leave the EU. The EURUSD is at 1.4278 and GBPUSD at
1.6278. There is a possibility of further recovery of European currencies today.
The BoE and FOMC minutes of the recent monetary policy meeting is due which is the major
theme for FX market today. BoE minutes should provide a better picture as to where the
committee stands on rates. MPC voters find themselves in a difficult position with regards to
agreeing to move on interest rates. Although recent data out of the UK continues to suggest
sluggish growth, pressure on the committee may mount as other European policy makers
remain focused on addressing high rising inflation.
The FOMC minutes released to be released today should give insight as to the Fed’s outlook
on interest rates as the $600B quantitative easing program is set to expire next month. US
dollar is trading flat before the FOMC minutes today.
Monday, May 16, 2011
Forex market update
The US dollar gained v/s the Indian rupee during the morning session today and currently trading around 45.17 as US dollar gained sharply on risk aversion. The EURUSD dropped on New York session to 1.4050 after advancing towards 1.43 during the mid European session. The pair is currently at the Friday’s low in Asia which has caused the EURINR May contract to slide towards 63.50 levels.
The International Monetary Fund and European Union finance ministers were slated to meet late Monday. They were expected to ratify the Portuguese bailout and may adjust loan conditions for Ireland, as well as consider the situation in Greece. However, the arrest of Dominique Strauss-Kahn, managing director of the IMF, on sexual-assault charges in New York on Saturday, and reports that the incident will prompt his resignation, has fuelled fresh uncertainty about the progress of resolving Europe’s debt concerns. Read more about the IMF chief’s possible resignation.
The EURUSD is likely to decline towards 1.37 levels if rates manage to hold below 1.40 levels. This may push the EURINR lower towards 63.20-63.00 levels in the short term. While in case of USDINR may be holding firm in such scenario.
In case of GBINR is expected to stay weak tracking Euro while decline may be limited with gains in USDINR pair. The 72.50 is a important support for the short term.
For the day, the USDINR May contract is expected to stay firm with immediate resistance at 45.20 and then 45.35 levels. Supports are seen at 45.09 and then 44.97 levels.
In case of EURINR, there is a possibility of sideways move today with immediate support at 63.40 levels. Resistance is seen at 63.80 levels. The GBPINR is expected to see range bound move with immediate support at 72.90 and resistance at 73.30 levels.
The Japanese Yen is likely to stay firm as long as it holds the intraday support of 55.55 levels. The resistance is seen at 55.95-56.-00 levels.
Tuesday, May 10, 2011
Power Finance Corporation - FPO details
| Issue Open | May 10 - 13th, 2011 |
| Issue Type | 100% Book Built Issue FPO |
| Issue Size | 229,553,340 Equity Shares of Rs.10 |
| Face Value | Rs.10 Per Equity Share |
| Issue Price | Rs.193 - Rs.203 Per Equity Share |
| Market Lot | 28 and in multiples of 28 shares |
| Listing At | BSE & NSE |
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