Jayesh Mehta, MD & Country Treasurer, Bank of America says the market is waiting for some measures come in from policymakers after which there might be some momentum reversal.
Below is the verbatim transcript of Jayesh Mehta's interview on CNBC-TV18
Q: There has been a bit of intraday recovery which has come in to the rupee. Would you have any anecdotal evidence on what led to that recovery?
We did see a sharp spike at 68.75/USD and then we did some selling; some of the public sector banks were also selling, so we assume there would have been some intervention and that has brought it down to 67.75/USD and now it’s back to USD 68/USD. So, that’s a bit of a respite, but having said that even at the current level, it’s still higher than 1.5 percent over yesterday and that is still concerning.
However, now you have almost all markets linked to each other, so equities looking at the currency and currency looking at equity and both are reacting simultaneously and same is happening with the bond, looking at currency. Therefore, the whole thing is still determined on basically we still need to go for growth factors and that is what is missing.
Q: The larger macro question now, how high is the risk of a downgrade now. This morning also we had the S&P economist tell us the road is going to be tough for countries like India going forward given the kind of steep depreciation that we have seen, the kind of increase in Brent prices, till now no action from the government on diesel front. How high is the risk of a downgrade?
A: Ten days back the rating agencies reaffirmed their rating but in the last five days or the last four working days, the fall has been so steep and the two factors which matter for our fiscal and BoP, which is gold and oil prices have gone up dramatically in the last one week. So, yes, there is a concern and we need to get some action. We are talking right thing.
Yesterday’s speech by the finance minister in the Parliament was very focused on growth and we need to lead by growth rather than monetary actions and stuff, but we need to start getting all these points into action. I think the market is waiting for some sort of action to happen and that is where the trigger point will be. So, right now, till no action comes in, it is going with the momentum which is very negative for the Indian currency at this moment and it is dragging the momentum and it continues.
So, market is also waiting that once some implementation or some measures come in, that is when the market will reverse the momentum. So, that is where the whole challenge remains.