Re likely to remain weak against $

The report says that key Indian economic indicators would be keenly watched too. Latest trade figures show an increasing trade deficit as imports climbed and exports fell. Cumulative trade deficit climbed to $ 6.7 billion upto November 1998 as against $ 3.37 billion for the same period last year.

"The INR is expected to remain weak, though any volatility would be followed by the Reserve Bank measures to reduce volatility," thereport says. "On the capital account there has been a slowdown in FDI and NRI funds and also portfolio flows. While direct investment and portfolio flows for FY 1998 were $ 5.025 billion, flows this year upto August aggregated only $ 620 million," the report says.

Says the report, "the coming period will witness the advent of the Euro and most market activity would focus on its introduction and subsequent teething problems associated with the start of the new currency. The strength of the Asian currencies might not sustain itself in the future as the Japanese economy continues to be weak though the currency is strong."

SBI Caps has said that the move by the government of India to access the pre-payment window of External Commercial Borrowings will have to be only out of foreign equity inflows. "This will clear the way for redemption of bonds issued by Indian companies which have become unattractive. To redeem this debt, companies would however have to issue GDRs," the report says.

Power GridCorporation of India, IRFC and Hughes Ispat accessed foreign funds in November.

The report further said that with the market focus shifting to the launch and prospects of the Euro, the market was seen viewing European currencies as a relatively good bet.