Re rise may be nearing end

A consensus is emerging among economists, bankers and companies that the rupee, which touched a nine-year high of 40.28 to the dollar on Monday, is unlikely to appreciate much further.

If anything, the Indian currency, which has been rising incessantly as capital inflows have continued unabated, will decline a little after holding on to the current level for some time.

This belief will only be strengthened by Commerce Minister Kamal Nath's statement in Mumbai today that his ministry was working on a relief package "� mainly tax exemptions "� for exporters, the hardest hit by a strengthening rupee. Nath said his ministry was in talks with the Reserve Bank to address the appreciation.

Said Abheek Barua, the chief economist of ABN Amro: "In the coming months, I see the rupee depreciating a bit... The recent cooling of inflation will allow the RBI to have room for intervention without worrying about liquidity." He, however, said that there was still some bounce left in the rupee.

Said Partha Mukherjee, the head of treasury at UTI bank: "Over the next three months, the rupee is expected to move in the band of 40.25-40.65, given the strong inflows, both portfolio and direct."

According to Ajit Ranade, the chief economist of Aditya Vikram Birla Group, the rupee, going by the macro-economic scenario, should weaken in the middle term.

This is bound to spread relief across sectors, even though those that earn most of their revenues from exports will take the maximum comfort.

Larsen & Toubro President (operations) J P Nayak fondly recalls the old days when he had his suits stitched in Bangkok. The finished piece was delivered the same day and, with one rupee equalling two bahts, it was a steal. Yet, he does not want a return to the old days.

"If imports become cheap, it will erode the long-term competence of the country," he said.

Says Ganesh Kumar Gupta, the president of Federation of Indian Exporters Organisations: "Many exporters, including me, are planning to concentrate more on other businesses."

The rising rupee has also caused concern among software companies, much of whose income comes from overseas. Says V Balakrishnan, the chief financial officer of Bangalore-based Infosys Technologies: "Every 1 per cent change in the rupee-dollar rate will have an impact of 40-50 basis points on the operating margins of IT companies." He said the company was trying to reduce costs to mitigate the impact.