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2 Mar 2015
Rates, Equity and FX strategy post the Indian budget – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura, view the recent Indian budget to be positive for Indian bond markets, bullish for the INR and equities.
Key Quotes
“Rates strategy: We remain constructive on bonds and expect bond markets to react positively to the budget. Despite a higher fiscal deficit, lower than expected gross supply should be welcomed by the bond markets, in our view.”
“Overall, rates markets should treat this budget as positive and we expect them to trade with a bullish bias on lower than expected supply, continued disinflationary pressures and monetary easing expectations.”
“FX strategy: We expect the budget, with its relaxed fiscal deficit target but an improved quality of fiscal consolidation, to be supportive of our bullish INR view.”
“Our short USD/INR position is supported by expectations of further foreign portfolio inflows along with a marginally positive basic balance, strengthening economic cycle, terms-of-trade benefits from low commodity prices, gradual rate cuts, India’s lower vulnerability to US Fed policy normalisation, and our view of a step back in the Reserve Bank of India’s aggressive FX intervention.“
“Equity strategy: Overall, from the markets perspective, we view today’s budget to be positive as it continues to adhere to the government’s agenda of higher growth and its firm emphasis on easing longer-term supply-side constraints.”
“We maintain our positive view on the market and stick to our December 2015 Sensex target of 33,500.“
Key Quotes
“Rates strategy: We remain constructive on bonds and expect bond markets to react positively to the budget. Despite a higher fiscal deficit, lower than expected gross supply should be welcomed by the bond markets, in our view.”
“Overall, rates markets should treat this budget as positive and we expect them to trade with a bullish bias on lower than expected supply, continued disinflationary pressures and monetary easing expectations.”
“FX strategy: We expect the budget, with its relaxed fiscal deficit target but an improved quality of fiscal consolidation, to be supportive of our bullish INR view.”
“Our short USD/INR position is supported by expectations of further foreign portfolio inflows along with a marginally positive basic balance, strengthening economic cycle, terms-of-trade benefits from low commodity prices, gradual rate cuts, India’s lower vulnerability to US Fed policy normalisation, and our view of a step back in the Reserve Bank of India’s aggressive FX intervention.“
“Equity strategy: Overall, from the markets perspective, we view today’s budget to be positive as it continues to adhere to the government’s agenda of higher growth and its firm emphasis on easing longer-term supply-side constraints.”
“We maintain our positive view on the market and stick to our December 2015 Sensex target of 33,500.“