Mr. Jyoti Roy - DVP - Equity Strategist, Angel Broking Ltd
"India's merchandise trade deficit for the month of September 2020 stood at USD 2.7bn as compared to USD 11.7bn in September 2019. Exports for September 2020 was up by 6.0% YoY to USD 27.58bn, while imports were down by 19.6% YoY to USD 30.31bn. The trade deficit has narrowed from August's USD 6.77bn due to year on year increase in exports. Oil imports were down by 35.9% YoY to USD 5.83bn while non oil imports were down by 14.4% YoY to USD 28.61bn. The economic slowdown and sharp fall in fuel prices due to Covid-19 has led to compression of India merchandise trade deficit which coupled with strong FPI flows have led to a strengthening bias on the rupee. In order to counter an appreciating rupee the RBI has been intervening in the forex market which is reflected in India's foreign exchange reserves which has hit all time highs of USD 551bn as on the 9th of October. Going forward we expect overall BoP to remain in the surplus barring any unforeseen event which will put pressure on the USD relative to the INR. In order to counter the appreciating bias we expect continued intervention by the RBI in the forex market as the Government and the RBI would not want the rupee to appreciate significantly from current levels though may tolerate some amount of appreciation."