Cross hedging on INR (Short Futures + Long ATM Calls)

The Indian currency is unlikely to depreciate much on account of improving current account deficit which is benefitting from low crude prices and reducing import volumes.

On successful completion of 1 year steady governance in Indai has evidenced a good set of economic numbers YoY basis including controlled trade balance.

GDP growth - 6.9% to 7.5%.

Inflation reduced - 8.3% to 4.9%.

Forex reserves increased - $315 bln to $354 bln.

Current A/c Deficit reduced - 4.7% to 1.7%.

Trade recommendation:

Since we look ahead the currency pair (JPYINR) to slip further towards 49 levels, fresh short build up opportunities can be seen and simultaneously the same should be hedged by going long on mid month ATM calls of USD/INR pair.