If Re touches 58 mark, may dip to 60/$, warns Parsons

In an interview with CNBC-TV18, Nick Parsons of National Australia Bank said that taking all these factors into consideration, the mood in the European market is one of caution and defence. People are waiting for the outcome of the 20th EU Summit next Friday and therefore, Parsons feels that it is better to be out of the market for a week.

Talking about the depreciating rupee, Parsons said that he is not surprised with it. He further added that if the Indian currency touches the 58 mark, there will be a general consensus towards the 60 per dollar mark. At that point, some substantive action from the RBI can be expected, believes Parsons.

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. 

Q: What's the mood now for the European equities? The manufacturing data or in general the economic data from both Europe and US was on the weaker side and the Fed hasn't obliged. How are people approaching the equity markets now and what is the way forward?

A: The mood is certainly one of caution and there is very little appetite amongst the investors we speak to, to be adding risk positions after the selloffs that we have seen. There is a mood that says it's better to be out of the market for a week and wait for the outcome of the 20th EU Summit next Friday then try to second guess what might be discussed and what might be announced.

The mood is one of caution and defence. Certainly, it's not one where people are actively seeking to take positions one way or another. It's a very low volume day in European markets.

Q: What is your view on the rupee? I know you track it closely and you track the euro-dollar as well. How do you see the kind of pressure that we have got so far and do you see it worsen?

A: The pressure on rupee is not a surprise. I spoke with you a month ago when we were trading at 56.20 and we were saying that actually the price action has not yet become parabolic in the sense that you get an ever accelerating move to the upside in the dollar-rupee. It's beginning to threaten to do that right now. We gapped higher.

We have been to a high of 57.32, trading 57.22 right now. I think once we get above 58 and it becomes market consensus that we will definitely approach 60. Then I think the time would be right for some intervention. I didn't recommend intervention when we were at 56.20.

I think if we get above 58 in a quick fashion from here, then I would certainly be on the watch and on the lookout for some more substantive action from the Reserve Bank. I think it is going to go weaker, but I would look for them to begin to start thinking of doing something about it.