The global investment bank has also made a forecast of further weakening of rupee to 43.9 to a dollar in a three-month time span and 44.1 in six months.
However, "there are significant upside risks in the near future to our three, six and 12 month targets," the report said adding "our forecast of double-digit inflation till end-2008 hurting sentiments and weak portfolio flows will continue to put depreciating pressures on the Indian rupee".
As oil prices spiral up, the report estimates big increase in India's current account deficit by the end of the current year.
It was 1.5 per cent of GDP in the previous fiscal.
India's trade deficit widened to $10.8 billion in May 2008 as exports growth slowed down and a 50.8 per cent increase in oil import during the month pushed the overall import bill.
The surging oil import bill also turned India's current account balance into deficit of $1.04 billion in the fourth quarter of 2007-08 against a surplus of $4.25 billion a year ago.
With this, India's current account deficit rose by 77 per cent to touch $17.4 billion, constituting 1.5 per cent of GDP last fiscal against $9.8 billion or 1.1 per cent of GDP in 2006-07, according to data by the Reserve Bank.
