INDIAN BANK
HO/INTERNATIONAL DIVISION
66 Rajaji Salai, Chennai - 600 001
Website : www.indian-bank.com
FOREX NEWSLETTER
(FORTNIGHTLY)

MARKET OUTLOOK FOR THE NEXT FORTNIGHT

(16/04/07 - 30/04/07)

News Items

The focus of economic planning over the next five years would be on the ways and means to foster inclusive growth in the economy, according to Mr Montek Singh Ahluwalia, Deputy chairman, Planning Commission. As the economy was on 9 - 10 per cent growth rate over the next five years, the challenge was to ensure inclusive growth cutting across the urban-rural divide. "In the mid-1990s, there were doubts about the outcome of economic reforms and their impact on growth. Those doubts have led to a different criticism. Now that we know the recipe for growth, the criticism is whether it would be inclusive or not," the said.

He further added that it is our objective to bring a policy change that would ensure a 4 per cent growth in agriculture. Listing out the priorities of the Eleventh Plan, he said ensuring equal distribution of infrastructure growth in urban and rural areas, promoting public-private partnership in education and healthcare sectors top the agenda of the Government. Predicting that over the next 20 years there would be breath-taking structural changes in the Indian economy, he said Indian investments abroad would go up.

"The real challenge for corporates and individuals is to cope with the constant changes in this transition period", he said. He added that in earlier days, the fad was to work for MNCs abroad. Now it would be more exciting to work abroad for an Indian MNC.

Global cotton outlook for 2007-08 is developing to be immensely beneficial for Indian cotton growers and exporters. As the cotton market moves away from the 2006-07 season, interest is increasingly focused on the next season. Players around the world have already begun to discuss market fundamentals for 2007-08. Signals for export surplus in the US and China's import requirement in 2007-08 will be watched closely. In a market with fairly balanced fundamentals, even a small change in either supply or demand would impart a disproportionately larger price impact. Without exception, Indian market participants too are watching developments.

Of the estimated output of 265-270 lakh bales, arrivals so far are estimated at about 240 lakh bales. The forecast of southwest monsoon and its onset by early June will be monitored closely.
As the world cotton market goes through a period of lull and waits for market-making factors to develop over the next 4-6 weeks, the Washington-based International Cotton Advisory Committee (ICAC) says world cotton production in 2007-08 would be largely unchanged from the previous year.

Interestingly, however, production in China is expected to decline slightly to 6.5 million tonnes (mt), still the second largest up to date, while production in the US is forecast to be down 10 per cent to 4.3 mt. On the other hand, ICAC expects a slight increase in India to a record 4.7 mt. Should these factors materialise, it would mean a fabulous season for Indian cotton growers and exporters. Both demand side and supply side forecasts favour Indian cotton. A 10 per cent decline in US cotton output would translate to so much lower export surplus and a decline in China's crop would translate to higher import requirement.

India must ready itself to face and benefit from a rare opportunity to increase output and generate enough surplus of good quality to cater to export demand. World cotton consumption is projected to increase by 2 per cent to 26.7 mt in 2007-08, driven mainly by Chinese mill use. With the world production set to trail consumption by 1.5 mt, stock draw-down is inevitable. It is a sure recipe for a price spike. Cotlook A-Index, as indication of global prices, is forecast to average 62 cents a pound in 2007-08.

SEBI MOOTS WATCHDOG FOR INVESTMENT ADVISORS

The Securities and Exchange Board of India (SEBI) is in favour of creating a private sector self-financing regulatory organisation (RO) as the first level regulator for investment advisors. The RO should develop principle-based regulations with risk-based examinations and implement regulation of discrete market segments in phases, said a consultative paper from SEBI on investment advisors. An investment advisor is an individual or firm advising clients on investments. Currently, entities involved in investment advice but not covered by SEBI regulations are shops engaged in distribution of retain financial products, banks, certified fiancial planners, chartered accountants, tax consultants, etc.

SEBI intends the RO to publish regulations defining the process for regulations defining the process for regulation and registration, entry and exit, reporting and market conduct.

In a testimonial to the gorwing reach of the Indian pharma industry abroad, pharma industry abroad, pharma exports from the country are acquiring a broader base and are on a steady rise in markets other than the European Union and the US.

While Europe and the US continue to have a lion's share in terms of value, exports to Africa and Commonwelath of Independent States (CIS), among others, are growing at an impressive pace in the first half of the fiscal year 2006-06. Between April 6 and October 6, exports of drugs, pharmaceuticals and fine chemicals to Africa and CIS grew by 22.83 per cent and 7.06 per cent respectively, corresponding to the period last year.

These markets are becoming significant in value terms as well. While exports to Africa stood at $ 402.48 million as the fourth largest export market for India after Eurpoe, Asia and North America, the CIS occupied fifth position with $ 215.51 million. Nigeria, South Africa and Kenya are the top markets for India in Africa. The largest number of the US FDA approvals for our facilities, highly competitive prices and lack of manufacturing facilities in many African countries are working in favor of the Indian industry. Industry pundits are expecting phenomenal growth in the exports to Africa and the CIS market in future.

 

INR = INR looks strong as USD weakness pervades. Range expected 41.30 to 42.30. Sell on rallies preferred. Further, rate hikes will attract more inflows. RBI intervention will only give more opportunity for selling USD.

EUR = EUR looks bullish and might try 1.3750. Support seen around 1.3430. Rate hike possibility and overall USD weakness will keep EUR biddish in the ensuing fortnight. Against, INR EUR to trade between 56.00 to 58.00.

GBP = GBP also looks biddish and might trade between 1.9720 and 2.0150. Buying on dips suggested. Against INR GBP to trade between 83.00 to 85.00.

JPY = Flourishing carry trade and lower yields have kept JPY weak. Range expected 118.00 to 121.00. Buying on dips suggested. Against INR range expected 34.50 to 36.00

PS: Views expressed here are only indications. The Bank or any of it's officials will not be responsible for any consequences of any decisions taken on the basis of these indications.

FCNRD(w.e.f. 25.04.2007)						NRE(w.e.f. 25.04.2007)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	4.47	5.11	3.43	3.55	5.96	5.22
2 Years & above but less than 3 years	4.27	5.01	3.49	3.53	5.86	5.02
3 Years & above but less than 4 years	4.21	4.96	3.49	3.52	5.84	4.96
4 Years & above but less than 5 years	4.22	4.92	3.49	3.54	5.85	4.96
5 years only	4.26	4.87	3.48	3.57	5.81	4.96
SB NRE - 3.50 % at par with domestic savings deposit

 

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