The rupee has outperformed over the last few sessions. In an interview to CNBC-TV18, Neeraj Gambhir, managing director & co-head, fixed income India, Nomura says if the momentum continues then maybe 50.50, which is the next technical level on charts, could be tested.
Below is the edited transcript of the interview on CNBC-TV18.
Q: What's really your call on the rupee right now?
A: I think there has been a reasonably good momentum around rupee. I think it is getting driven by all these positive announcements around policy reforms and the actions being taken by the government.
I think there is also reasonably good amount of flows coming in the equity markets. So, both of these factors are giving good momentum to rupee right now. It doesn’t seem to be stopping. As far as the policy announcements are concerned, they continue to be in the positive direction. Globally also we are seeing good amount of risk rally. That also is contributing to rupees movement. As long as these factors continue, the momentum can continue in the short run.
It is very hard to take a level call because all the levels that we thought about have been broken in the recent past. I do feel that if the momentum continues then maybe 50.50, which is the next technical level on charts, could be tested. But we will have to see how long this momentum continues.
Q: Do you expect the outperformance to last over the medium-term? Despite the insurance reforms coming in, inflows haven’t been so great as far as the medium term is concerned because the parliament has to pass this first.
A: I would not think so. I think the current rally in rupee is basically a function of the global risk-on combined with the domestic policy actions. As far as the domestic policy actions are concerned, yes, the announcements have been pretty encouraging and in the good direction.
A lot of the issues will be there in terms of implementation. So, we will have to see how much time does the government take to implement some of these things and what is the on the ground implication of those changes. We will also have to see how the situation in Europe pans out because it is still not out of the woods completely and there are still a lot of issues that need to be resolved. So, I do feel that, in the medium-term, we will probably move towards higher levels.