India's inflation rate slightly declined.

The Indian rupee appreciated marginally, recovering after the Reserve Bank of India (RBI) had to intervene in the foreign exchange market. However, pressure from U.S. tariffs on metal ores created export challenges, leading to rupee sell-offs. Consequently, the RBI had to utilize foreign exchange reserves to support the rupee, which tightened an already constrained liquidity situation, putting pressure on major lending banks. Additionally, concerns about slowing economic growth prompted the RBI to cut interest rates by 25 basis points, marking the first rate cut in nearly five years. This move led investors to withdraw investments from the Indian market and redirect them toward more competitive Asian assets.

India's inflation rate fell to 4.31% year-on-year in January, the lowest inflation growth rate in a year. This decline brought inflation closer to the RBI's 4% target after remaining above 5% for four consecutive months. The decrease was largely driven by a slowdown in food prices, which dropped to 6.02% from 8.4% in December, accounting for roughly half of overall inflation. This was mainly due to a sharp decline in vegetable and fruit inflation, while fuel and energy prices remained in a state of deflation.

India's foreign exchange reserves stood at over $630 billion at the end of January, marking a halt in the decline of international reserves after hitting a 10-month low of $624 billion. This was largely supported by a weakening U.S. dollar. The RBI's use of foreign reserves to support the rupee aligned with its policy of preventing excessive currency depreciation.

The RBI decided to cut interest rates by 25 basis points to 6.25% in its February meeting, marking the first rate cut since May 2020 and aligning with market expectations. The move aims to counteract slowing domestic economic growth amid rising global trade uncertainties.

Regarding economic outlook, the RBI forecasts GDP growth of 6.7% for the fiscal year 2025-2026, while inflation is expected to remain steady at 4.2%. Projections indicate inflation will rise to 4.5% in Q1, 4.0% in Q2, and 3.8% in Q3 of 2025. Meanwhile, the RBI also reduced the Standing Deposit Facility (SDF) rate by 25 basis points to 6% and the Marginal Standing Facility (MSF) and bank rate to 6.50%, while maintaining the Cash Reserve Ratio (CRR) at 4% after a 50-basis-point reduction in December.

HSBC India's services PMI index fell to 56.5 in January 2025 from a preliminary estimate of 56.8 and a four-month high of 59.3 in December. However, the latest figure marks the 42nd consecutive month of growth in the services sector, though it was the weakest expansion since November 2022 and fell short of the market forecast of 57.6. New business growth was the slowest since November 2023, while foreign sales accelerated, primarily driven by demand from Asia and Europe.

Techical analysis data (5H)

Resistance: 86.988, 87.058, 87.101

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 86.832 - 86.875 but cannot break the support at 86.875, you may set a TP at approximately 87.058 and SL at around 86.762 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 86.988 - 87.058, you may set a TP at approximately 87.101 and SL at around 86.832 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 86.988 - 87.058 but cannot break the resistance at 86.988, you may set a TP at approximately 86.832 and SL at around 87.101 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 86.832 - 86.875, you may set a TP at approximately 86.762 and SL at around 87.058 or according to your acceptable risk.

Pivot point February 18, 2025 07:55 PM. GMT+7