INR update: Chinese and Indian data indicate a pause in pace of slowdown

Today morning market sentiments are a tad positive given China manufacturing PMI (Caixin) which came in at its highest in 3 years (51.8 vs 51.7 last month). On the trade front China seems to have laid down clear terms which is a rollback of all existing tariffs as a part of phase 1 deal. 

India’s GDP was expected by many to be much below 4.5%, making the print at 4.5%, a relief. On the other hand GST collection figure at higher than Rs. 1.03 lakh crores for November indicates that growth momentum has perhaps stopped getting worse, first sign of bottoming out. Although it is too early to form a definitive view on domestic growth as yet. 

This week RBI is likely to cut rates again and many believe that this could be the last cut in this cycle given that inflation is running higher than 4%. Contrary to normal economics, INR appreciates in a run up to a rate cut perhaps because it is seen as growth supportive. Dollar index closed November well below 98.9 levels indicating price action to be likely range bound for global currencies. USDINR failed to sustain above 71.75 in the first hour of trading today indicating that the pair returns to the  71.75-71.40 range for the rest of the week. First half of December should see some inflows making 71.40 the preferred direction. For the day, CMP 71.69, Range 71.78-71.55. 

Thanks 
Saket Agarwalla