Recovery in rupee continues on the second day as it closed near day low of 60.07 falling nearly 0.9 per cent. Over the last month Indian rupee (INR) has weakened significantly relative to the US dollar and alone in the month of July it has lost nearly 3 per cent. Rupee has been the weakest currency in Asia in comparison to dollar.
This sharp fall was caused due to many factors which included the fear of growing current account deficit. Exporters were shying away from buying expecting the currency to fall further, oil prices have gone up by 7 per cent in the last week alone and constant selling by FIIs, who booked their profits from Asian debt and equity markets.
RBI also acted finally on Monday when it banned banks from proprietary trading in domestic currency futures and options followed by SEBI, which doubled margin requirements on the domestic dollar- rupee forward trade. On short term basis, experts believe these moves will help curbing this speculative sell- off in the currency.
The Pioneer talked to industry experts and charted out the path that experts believe rupee will take going forward in the month of July now. Experts now feel that rupee is not expected to weaken to levels below 61.50 per dollar. “61.50 per dollar is the level which might be seen but rupee will not sustain at those levels and correct back to lower levels,” says Rakesh Bansal from R K Global Securities.
HDFC Securities, in their research report, pointed out that this month’s rupee outlook remains weak and feel that it will show 61.50 per dollar levels and will correct from its high back to the levels of 58.50- 59.90 per dollar. “The rupee’s outlook, therefore, remains negative. The Government is not coming up with any strong response. Oil prices, too, are going up, which may widen the current account deficit,” the report says.
Kurnal Dayma of First Step Capital says, “The recent fall is only based of speculation and lacked real demand. Rupee might show 62 per dollar levels also but because there is no real demand, it will not sustain at those levels. Also with measures initiated by Government and RBI, I feel 58.50 per dollar is the levels to which rupee will finally correct to.”
like Krunal Dayma, Ashok Agarwal from Escorts Securities has a similar view and feels 61.50 per dollar is the maximum level which rupee will show in this month and from there will correct back and consolidate around 59.50 per dollar levels. But Rajesh Satpute of Mangal Keshav Securities feel that going forward in the month of July rupee can slide to the 63 per dollar levels but won’t be able to sustain there.
Goldman Sachs recently in their research report revised their 3 month target from 55 per dollar to 58 per dollar. The international banker feels that rupee will start recovering from current levels and consolidate around 58 per dollar levels. “Over a 12 month horizon, we think that an improving growth- inflation trade- off and some improvement in the current account deficit can provide some support to the INR. We revise our 12- month USD/ INR targets to 56 from 52 earlier.”
Meanwhile, Indian markets carried the momentum from the US markets which closed in green after a good start of the result season. BSE Sensex rose 0.59 per cent and closed at 19,439.48. While Nifty 50 rose 0.82 per cent and closed at the levels of 5,859. Buying was seen in bluechip counters including Power Grid which rose ablove 4 per cent followed by Kotak Mahindra Bank, Sun Pharma & IndusInd Bank which jumped by 3.86 per cent, 3.3 per cent and 2.9 per cent respectively.