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

Currency Outlook

Rupee has been trading in a range of 44.56 and 45.40 during the last fortnight losing nearly a rupee making the over valuation of rupee on trade weighted basis slightly narrowed. Current account deficit and increase in oil price is still a cause of worry for INR. Inflows into equity has held appreciation of dollar considerably. The FOMC minutes due on 18.04.2006 holds the key for further direction for the forth coming fortnight. .

6 months forwards have been moving in the range of 0.45ps and 0.24ps. The receiving mode seems to be persisting and that would be the strategy for the fortnight.

The pair failed to breach 1.2323 high made on 24.01.06 conclusively. Though the failure from the high of 1.2333 made on 06.04.06 was swift and deep, another attempt is not ruled out as long as the trendline from the 27.02.06 low is not breached, which looks more unlikely. We would prefer to stay long for another shot at the January highs with stops below 1.2060. Fifty and two hundred day moving averages should cross very soon.
FOMC minutes due on 18.04.06 will give further clues on the direction of this pair.

EUR/INR is expected to stay in the range of 55.25 and 57.00.

This pair has held between the narrow range of 1.7630 and 1.7270 with minor unsustained breaks on the downside. The probabilities are for a break on the upside which might take it beyond 1.7800 and make an attempt at the highs made on 25.01.2006 at 1.7934. We would prefer to stay long in anticipation of this move with our stops placed below 1.7370. The points to be noted are that cable is still not over bought but the bullish momentum is very low.

GBP/INR is expected to trade a range of 79.35 to 81.80

Absolutely no change in view in this pair for this fortnight too. Still hovering between 115.45 and 119.40, the broad range of the last eight weeks. This process, with sharp intra-day moves, will probably continue till one of the level is broken. The probability of the upper band getting broken looks more likely which might see the pair testing 121.30 but a break below will be very bearish and 113.45 holding the pair will not be a likely scenario.

JPY/INR is expected to trade a range of 38.38 and 43.70

Other News Items

Unveiling a slew of measures to put Indian exports on a higher growth trajectory and create greater employment opportunities, the annual supplement to the foreign trade policy (2004-2009) has come up with sector specific initiatives to make India a hub for gems and jewellery exports and a major refueling stop for International flights. The Commerce minister Mr Kamal Nath, set a 20% growth target (about $120billion) 2006-07. He expected India's exports to exceed $150billion by 2009.

The two new 'WTO-compatible' schemes- Focus Product Scheme(FPS) and Focus Market Scheme (FMS)- have been introduced with the aim to promote specific products and overseas export markets respectively, and to provide employment in Semi-urban and Rural areas

A new scheme 'Duty Free Import Authorisation Scheme' has been launched to enable exporters to import the required inputs before exports and also allow them to transfer the scrip once the export obligation is completed. The scheme clubs the existing Advance Licence Scheme ( ALS) and the Duty Free Replenishment Certificate (DFRC) scheme. The DFRC would be phased out from April 30.

Imports made under this authorization would be exempt from payment of basic customs duty, additional customs duty, education cess, anti-dumping duty and safe guard duty.

India is currently the leader in outsourcing and IT services .However, studies show that China is expected to lead the pack much earlier than 2015.The factors that would be working against India would be its under-developed domestic market with very little access to capital and support infrastructure and probably the biggest sore spot of all being not geared towards entrepreneurship.

"Though cost effectiveness is a crucial pitch for Indian IT and outsourcing needs continued support,there should be more focus on product development. The mantra is to add and not shift focus to product development and the Indian talent in IT has to further develop according to Mr " Karl Schubert,CTO,Xiotech Corporation. Also,The E-Governance segment in India has immense potential with scope for an estimated 4.58 mio transactions worth $123 bio over a period of time.
The domestic IT industry ,which had a market size of $6 bio 2005-06,with an expenditure of less than 0.13% of the GDP.which is half of what China spends. The domestic IT industry, especially, the SME sector needs serious initiatives to leverage Indian business and economy. Further ,over the next five years ,domestic spending on outsourced IT services is projected to more than double, from Rs. 103 bio in 2004 to over Rs 238 bio in 2009.

Source: The Business Standard.

The Tamil Nadu textile industry is all set to become a $40-$50 bio industry by 2015 at a projected compounded annual growth rate (CAGR) of 12-13%. It has potential to create as many as 50 lakhs new jobs, according to the recent study done by the Confederation of Indian Industry (CII) on 'mapping of Human Resource Skills in Tamil Nadu 2015. Identifying the textile industry as one of Tamil Nadu's high growth sectors, the study estimated that the current sectoral man power requirement, which is about 40-50 lakhs people, is likely to touch 95 lakhs to 100 lakhs jobs by 2015.

According to the study, the textile industry is highly influenced by government policy support, globalisation and the impact of World Trade Organisation development. Home to more than 40% of the large and medium sized spinning mills in India, the state produces a third of the Indian spun yarn. It also enjoys a leadership position in spinning, weaving, knitted fabric and apparel segments. The spinning, weaving and processing have matured as high capital intensive and low labour intensive segments of the textile industry while knitting and garmenting have evolved to be low capital and high labour intensive.

Source: The Financial Express

FCNRD(w.e.f. 03.04.2006)						NRE(w.e.f. 19.04.2006)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	5.29	4.78	3.23	4.25	5.70	6.30
2 Years & above but less than 3 years	5.29	4.83	3.52	4.33	5.71	6.30
3 Years & above but less than 4 years	5.27	4.87	3.64	4.38	5.75	6.30
4 Years & above but less than 5 years	5.30	4.86	3.71	4.42	5.82	6.30
5 years only	5.31	4.85	3.77	4.47	5.83	6.30
SB NRE - 3.50 % at par with domestic savings deposit

 

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