Re seen strengthening to 53 a dollar by end-March

The rupee is expected to strengthen from current levels by end-March, amid foreign inflows into the country.

The Street expects current account deficit (CAD) concerns have been factored in by the market, due to which it might not affect the rupee’s movement further against the dollar. It is expected that in the Budget later this month, the finance minister will announce various reforms that will result in attracting more flows from foreign institutional investors into the country.

A median forecast of 10 experts polled by Business Standard shows the rupee will end at 53 a dollar by March 31.

But, those who expect it to weaken against the dollar from current levels say dollar demand by oil companies will limit rupee’s strengthening. It ended at 53.22 a dollar on Thursday compared with the previous close of 53.16.

 

“The rupee’s strengthening will be helped by financial sector reforms, anticipation of disinvestments and expectations of Budget promoting growth,” said IDBI Bank Chief General Manager and Head of Treasury N S Venkatesh.

The rupee had weakened to 57.16 on June 22. But it started strengthening due to FII flows. In rupee terms, FIIs have invested Rs 73,209 crore in Indian markets this financial year so far, shows Securities and Exchange Board of India data.

However, few experts are of the view that strengthening of the rupee below the 53 mark a dollar may be difficult. “Even if it does go below the 53 mark, it will not be sustainable. Oil prices are high and much of gold imports that happen in January, payment of that will happen in February and March,” said Kotak Mahindra Bank President (group treasury and global markets) Mohan Shenoi.

In fact the Street does not rule out the possibility of the rupee touching 55 per dollar from now till March 31. “We may see increase in FII limit for government bonds and corporate bonds, but that is a temporary thing,” said India Forex Advisors Chief Executive Officer Abhishek Goenka.

Besides, dollar demand by oil importers have kept the rupee under pressure and it is expected to continue going forward.