Indian stock market and Rupee / Dollar update

Indian shares are likely to open higher following a rebound in global markets. The US stocks ended higher overnight on bargain hunting and most of the Asian markets are currently trading in the green. Crude prices settled higher at US$68.97 a barrel on supply concerns. On the local front, the markets are likely to witness volatility on the day of expiry of June futures and options contracts. Analysts feel that global cues will play a bigger part than the local cues as the F&O contracts expiry session will be governed by demand-supply forces.
The bond yields rose on Wednesday as traders expected Treasury bill auctions to tighten the supply of cash, and they were also wary theRBI could take steps to drain more funds from the system. The yield on the 10-year federal bond ended at 8.23%, higher than the previous close of 8.20%. The yield hit a 10-month high above 8.40% this month. “Yields also rose as traders expect some measures from the Reserve Bank of India soon, like the sale of market stabilisation bonds or an increase in the cash reserve ratio (CRR),” a foreign bank trader said.
Overnight call rates ended at 6.50-7.50%, up from 5.50-6.50% at the previous close, which traders said was a sign of tightening cash conditions. The RBI sold Rs 3500 crore of 91-day T-bills and Rs 2500 crore 182-day T-bills on Wednesday.
Suspected RBI currency intervention and a pick-up in federal spending had boosted cash supplies in the banking system, pushing overnight rates to a 10-year low of 0.10% earlier this month, before a slew of bond and bill sales by the central bank drained some of the excess cash in recent days.

The RBI through its liquidity adjustment facility absorbed just Rs 10 crore against the prescribed Rs 3000 crore under the reverse repo auction
from the banking system on Tuesday. The RBI has been seeing average offerings over Rs 70000 crore from the banking system during the course of last few weeks.

The rupee eased on Wednesday on ebbing global appetite for risky assets and month-end dollar purchases by oil companies, though losses were limited by exporters buying rupees on the dip, dealers said. The rupee ended at 40.9725/9825 per dollar, slipping from Tuesday's 40.9025/9125. The rupee has been in a broad 40.50-41.25 range since early May.

“Exporters would unload dollars every time the rupee hit 41, and that’s what kept us within range today,” said the chief dealer with a foreign bank. Dealers said the exporters sold US currency when the rupee tested 41 per dollar, limiting losses, and expected them to continue selling dollars each time the local unit slipped. Firming overnight lending rates also lent support to the rupee.

In the forward market, RUPEE / DOLLAR FOREX AND GOLD TRADE the six month forward premium ended higher at 3.34% from its previous close at 2.97% while the 12 month premium also moved up to 3.03% from its previous close at 2.81%.

Indian shares settled lower Wednesday following late selling in auto and metal stocks. All the Asian markets, except China, and European markets declined. The 30-issue Sensex dropped 70.02 points or 0.48% to end at 14,431.06 after opening slightly higher at 14,520.19. The Sensex, however, came off its low for the day of 14,407.12. The broader S&P CNX Nifty settled at 4,263.95, down 21.75 points or 0.51%.

The Rupee ended at 40.97/98 a Dollar, down from Tuesday's close of 40.90/91. The Rupee weakened following month-end dollar demand from oil companies and decline in equity markets.

The turnover in the BSE was Rs. 4,844.02 crore and that in the NSE totaled Rs. 9,375.13 crore. According to the data revealed by the NSE, Foreign Institutional investors or FIIs were net sellers for Rs. 567.33 crore on the NSE and BSE in the capital market segment and Rs. 690.76 crore in the futures & option segment on Wednesday. As per SEBI data, FIIs were net sellers for Rs. 299.60 crore or US$73.50 million in equities and net buyers for US$9.12 crore in derivatives on Tuesday.

Crude oil prices settled higher on Wednesday after a US government inventory report stoked concerns about the gasoline supplies during the summer driving season. Light, sweet crude for August delivery climbed $1.20 to end at $68.97 on the New York Mercantile Exchange. Currently, crude oil is being quoted at around $69.23 barrel in Asian trades.

In the U.S., the stock markets turned higher over the course of the trading on Wednesday on bargain hunting. The major averages all climbed into positive territory, with the tech-heavy Nasdaq showing a particularly strong upward move. The Dow closed up 90.07 points or 0.68% at 13,427.73, the Nasdaq climbed 31.19 points or 1.21% to 2,605.35 and the S&P 500 added 13.46 points or 0.90% to end at 1,506.34.

Indian ADRs ended mixed on Wednesday in the regular trading session. In the tech sector, Infosys Technologies added 0.49%, Wipro gained 0.64% and Satyam Computer Services jumped 0.98%. Automaker Tata Motors dropped 0.36%. Among banks, HDFC Bank gained more than a percentage and ICICI Bank climbed 0.74%. In the telecom space, VSNL slipped 0.34% and MTNL closed unchanged.