Curbs won't slow Re, say Citigroup, Morgan

India's plan to restrict money coming into the stock market may fail to cap the rupee's gains as the pace of economic growth will keep attracting funds from overseas, Citigroup Inc said.

Citigroup, the world's third-biggest trader of foreign exchange, is sticking with its rupee forecast of 39 to the dollar by the end of March, Rohini Malkani, the bank's Mumbai-based analyst, wrote in a research note yesterday.

Surging capital inflows will make up for any slowdown in portfolio flows, keeping the country's balance of payments in surplus, she said.

Sebi on October 16 suggested FIIs shouldn't be allowed to issue or renew offshore derivative instruments linked to futures and options. It wants the so-called participatory notes sold within 18 months. Holders of the notes need to respond to the proposals by October 20.

"While the proposed measures will have a temporary impact on flows, they are unlikely to reverse the rupee appreciation story," Malkani said.