INR update: Fears of a pandemic loom even as markets hope for the best

The novel corona virus situation can be compared to turbulence in an aircraft which makes one fear an immediate crash but statistically crashes are rare while turbulence is frequent. Markets seem to have realized the same and assumed that the virus will cause no harm which can be termed significant from a global perspective. Looking at the history of the past 100 years of pandemics across the world it seems a valid assumption as none of the episodes have been able to affect growth substantially at a global level. This said, the turbulence has become much more pronounced (with virus spreading and death toll rising) and it would be difficult to not fear a crash till the time it completely stops.

The corona virus is the only dominant theme currently driving markets. The markets seem to surprisingly calm about the budget and expects no surprises there. The inflow pipeline post budget continues to be strong which should limit the upside in case of fresh risk off sentiments. Due to the corona virus news flow short USDINR positions could stop out easily and therefore not recommended. CMP 71.20, Range 71.10-71.50 for the day.