Re seen at 43.50 by year-end: StanChart

The rupee is likely to touch 43.50 by the end of calendar 2004 and will be at around 45-45.25 against the dollar by the end of March, even as imports rise.

According to Standard Chartered, the rupee is likely to gain much faster than is anticipated currently.

"At the end of the second quarter of 2004, the six-month London inter-bank offered rate is likely to be at 1.9 per cent, the 10-year benchmark government security at 5.10 per cent and the repo rate also at the current level of 4.5 per cent. Short-term interest rates can come off based on liquidity," said StanChart's regional head global markets (India and Nepal) M A Ravi Kumar.

He was speaking on the occassion of the launch of the 'Global Markets Annual 2004'. These reports are send to their customers in India and also to their international network.

According to the annual, the rupee has mirrored the dollar's decline and has not appreciated on a real effective exchange rate basis so far.

The rupee is cheap with respect to relative purchasing power parity valuations. According to Kumar, the attrition in forex reserves in 2004 would increase by another $15-20 billion.

"This might not happen if the imports increase sharply or the government decides to prepay more loans. Rising imports will go against the strengthening rupee," he said.

On treasury income of banks, he said the forex income and derivative income of banks would rise.

He also added, "The unutilised capacity of the industry is now being used up. Corporates would need huge amount of money to invest in new facilities."

The report added that the falling primary commodity prices should keep the average inflation at around 4.5 per cent in 2004.

It also added that from November 2003-March 2004, the industrial growth would average above eight per cent year-on-year.

The numbers for a couple of months could even touch 10 per cent year-on-year.