MC: See weak Re due to rising deficit, FII flows: Mecklai Fin
Rugved Dhumale, AVP, Mecklai Financial Services, feels the rupee will remain weak throughout CY08 or FY09. “Trade deficits have stayed up at USD 10 billion per month even after oil has come down by almost USD 100 per barrel. Exports have started to lag down due to the global economic slowdown. We have also seen a large amount of FII outflows this year.”
Going by these fundamentals, he said the rupee is likely to remain weak. “There is no significant chance of rupee appreciation. It will not be surprising to see it above Rs 51–52 per dollar level.”
Here is a verbatim transcript of Rugved Dhumale’s exclusive interview on CNBC-TV18. Also watch the accompanying video.
Q: How are you looking at the rupee up to the end of the year? Do you think we have seen the highs of the rupee and more pressure will pile up as we go towards December end? A view, also, on the rupee in the run-up to March 31.
A: The rupee is likely to remain weak till at least the end of this year. The fundamentals are also playing a lot in the rupee market currently. Trade deficits have stayed up at USD 10 billion per month even after oil has come down by almost USD 100 per barrel. Also, exports have started to lag down due to the global economic slowdown. So that is something, which is going to affect the rupee plus on the capital side, we have seen a large amount of foreign institutional investors (FII) outflow this year. We will definitely not be seeing any significant inflow in the remaining part of this calendar year or this financial year.
Going by these fundamentals, the rupee is likely to remain weak itself and there is no significant chance of rupee appreciation.
Q: The last quarter of the financial year normally sees a current account balance or at least sees a reduced current account deficit. You don’t see any rally for the rupee, any improvement from the last quarter?
A: In the last quarter, you could see some sporadic improvements but fundamentally the capital markets are the main driver for the rupee. The current account is sticky and won’t really move significantly in the next three–four months. What will impact the rupee is how capital flows are shaping up, how foreign direct investment (FDI) figures hold up.
Q: Can you give us a number? What do you see by way of rupee downside?
A: Predicting a number even in a stable market scenario is difficult, so it’s even more difficult in today’s market scenario. However, it will not be surprising to see it above Rs 51–52 per dollar level.
