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    How far can the rupee slide? What experts say

    Synopsis

    Here’s how top Dalal Street experts and economists reacted to today’s fall in Indian currency.

    rupee-ThinkStock Photos
    Here’s how top Dalal Street experts and economists reacted to today’s fall in Indian currency.
    Indian rupee recovered from its all-time intraday low of 70.09 against the US dollar to close 4 paise higher at 69.89 on Tuesday amid lingering fears that Turkish economic crisis could lead to a global financial meltdown.

    The government blamed “external factors” for the rupee's fall to an all-time low against the US dollar and said that there is nothing to worry about as of now.

    Economic Affairs Secretary Subhash Chander Garg said external factors may ease going forward, PTI quoted him as saying.

    Here’s how top Dalal Street experts and economists reacted to today’s fall in Indian currency.

    Arvind Chari - Head - Fixed Income & Alternatives, Quantum Advisors
    As the Indian currency witnesses a sharply depreciating trend, comparisons start getting made to the 2013 scenario.

    The Indian Rupee then in 2013 was bracketed as being part of the ‘Fragile Five‘ economies. The fragile five coined then were, Brazil, South Africa, Indonesia, Turkey and India.

    The Indian currency on Tuesday breached the 70-mark against dollar for the first time and has now depreciated close to 10 per cent in the year 2018 against the US Dollar.

    Despite the 10 per cent depreciation, the Indian currency is still relatively over-valued to some of its other emerging markets. But with this also being an election year and election years are known to bring its own idiosyncratic risks.

    Add to that the risk of global oil prices, rising global interest rates and the risk of US economic and geo-political policies under President Trump suggests that emerging market countries in general and rupee will remain under pressure and volatile in the months to come.

    Ananth Narayan, money market expert
    This sharp move that we saw since yesterday was clearly triggered by what happened in the Turkish lira, South African Rand and Argentinian Peso and the broader dollar strength. Having said that, it is clearly a knee-jerk reaction. Nothing has changed in the last 48 hours on a fundamental basis. This just underscores the fact that our external balance is great and that we have had vulnerabilities building up over the last 12 to 24 months. Those vulnerabilities are playing out now.

    Effectively, our current account deficit has been growing over the last few months and therefore every month we have a permanent outflow of dollars which needs to be funded by us borrowing less stable and less permanent money from overseas. This is not a great sustainable balance. In a sense, this correction that we have seen in the rupee this year is a reflection of the underlying imbalance and this should help correct that imbalance.

    Jamal Mecklai, CEO, Mecklai Financial Services
    It has hit 70 but 70 is only 10 paisa worse than 69.90 and everybody is going crazy about it. The reality is that for some time now, things have been getting steadily worse. Our current account deficit is higher. Money has been leaving the country and most important, there is global nervousness. So, it may have fallen a little below 70, but that is not the end of the world.

    It is the end of the world if you have loan and you have not covered it. It is the end of the world if you are an importer and you are uncovered. But the fact is, over the last 10 years from the 2008 crisis to 2013, when the Fed raised rates, the rupee fell by 50%. Between the peak of the crisis and now, the rupee has barely fallen because RBI has been really focussed on containing the volatility.

    Deepak Jasani, Head – Retail Research, HDFC Securities
    This fall over the last few days was caused by jitters in emerging market countries post the Turkish Lira falling sharply due to its economic crisis. This coming at a time when the developed economies have started to unwind the monetary stimulus creates fears of tightening liquidity and volatility in the currencies of emerging markets. However the fact that Turkish Lira has recovered sharply on Tuesday by around 5 per cent may ease the pressure on the rupee. In addition, soft CPI number for July 2018 will also help easing fears of continued rate hike by the RBI.

    Rushabh Maru - Research Analyst , Anand Rathi Shares and Stock Brokers
    The rupee has extended losses on Tuesday on account of panic demand from importers. The rupee has depreciated sharply in the last two trading sessions, hence lot of stop losses have been triggered. Given the uncertainty surrounding Turkey crisis and strength in the dollar index, importers are buying dollars aggressively. The RBI has been intervening very selectively in the market. Hence, an absence of aggressive intervention by the RBI has spooked the market. Since the rupee has plunged to 70 levels, 70.50 level will be the next short term resistance while 71 will be the important level to watch out for. On the downside, immediate support is around 69.30 levels.

    Peter Brandt, CEO, Factor LLC
    We think the situation in the rupee is very interesting and worth monitoring. There is a little bit of short-term conflict and confusion going on in the rupee. The rupee has been in a very tight range in recent months. Technically, should the rupee climb above 71, then we see the rupee going to 80 within four to six months. There could be a 10-15 per cent run on the rupee. If we were to trade individual equities in India all of a sudden, they become less attractive because we would be owning our assets in a depreciating currency. That is something that foreign investors would need to be aware of. There is some short-term support at 68.25. Should 68 be taken out then we could see the rupee drift back towards 66.5. But that is on a short-term basis. On a longer term basis, we think there is a very good chance we are going to see a depreciation in the rupee over the next year.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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