Hemant Mishr, Head-Global Markets, Standard Chartered Bank, said the rupee will continue to stay volatile. He expects equities to be the key leading indicator going forward. "We see rupee within Rs 47-48 per dollar if equities stay stable."
Here is a verbatim transcript of the exclusive interview with Hemant Mishr on CNBC-TV18. Also see the accompanying video.
Q: Are you expecting to see some near-term strength for the rupee?
A: We have already seen a lot of that. After closing at Rs 49.60 per dollar the day before, it gapped that Rs 49.30 per dollar, and has rallied all the way to Rs 49.15 per dollar.
At this level, I would expect some of the importers in oil companies to be buying. In fact, we are already seeing that. But there is clearly a change of sentiment.
I won’t be surprised if the rupee breaches Rs 49 per dollar over the next couple of days. What is important is how the equity markets perform though.
Q: Some would say that it is really a choke in the neck because equity markets itself are waiting for a stronger rupee?
A: You are right in some ways. But at this point in time, given that the demand-supply mismatch is largely on account of portfolio flows, when you look at things from a BOP (Balance of Payment) perspective, oil actually has a beneficial impact now. The Indian basket of oil is trading at around USD 45 per barrel.
So the big differentiate in terms of demand-supply mismatch is equities. If that actually doesn’t get pretty bad, I would expect the rupee to remain stable. But on days when you see significant outflows, the rupee could go through Rs 50 per barrel. So, expect volatility to remain, but in this case the leading indicator would be equities.
Q: Given that equity is flat or at least positive, how far do you see the rupee falling? It has fallen about 10% against the Rupiah in Indonesia and 3% against the Won. So, should one expect such kinds of movements in India as well?
A: I would expect the rupee to settle between Rs 47 per dollar and Rs 48 per dollar if the equities don’t plummet beyond current levels, for the simple reason that the market is long dollars at this point in time. I don’t think that is sustainable, if from a flow perspective, we don’t deteriorate over a period of time. So, it could come off by a couple of rupees.
