Don't see major rally in Re due to EEFC flows: HDFC Bank

According to Ashish Parthasarthy, head treasurer at HDFC Bank , most of the EEFC conversion should have happened yesterday itself. "I don’t think there is too much left for conversions today," he told CNBC-TV18 in an interview.

The RBI had on May 10 cracked down on exporters hoarding dollars and asked them to sell half the foreign currency in their accounts . It also directed all exchange earners to surrender 50% of their future earnings for conversion into rupees.

RBI had given a fortnight's time to complete the whole process.

However, Parthasarthy does not expect significant rally on the rupee due to the EEFC flows. He says the EEFC conversion related inflow may have been around USD 400 million. "The rupee will continue to move inline with global sentiment over the next month," he reiterates.

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

Q:What did you make of the Reserve Bank of India's (RBI) statement yesterday? It almost seem like a warning to exporters on not converting their Exchange Earner's Foreign Currency (EEFC) accounts, do you expect a flood of dollar supply to come in today?

A: I think most of the EEFC conversion should have happened by yesterday. There was a possibility of a significant amount of it happening towards the second half of the day and you will see the rupee appreciate a bit towards the second half. I don't think there maybe too much left for conversions today.

Q: So purely on the back of that you don't expect a major appreciation in the currency?

A: No, not purely on the back of that. I think the macro numbers and the story is reasonably well known. Now onwards I think it will depend reasonably on the global sentiment. Unless there is a huge risk rally, rupee will continue to remain under pressure during this one month or so.

Q: So the 60-70 paisa yank back that we saw in the currency yesterday, you think is a direct function of the EEFCs getting converted?

A: Yes, there was some flow. There was partly EEFC getting converted, part RBI intervention and part other flows. Towards the second half of the day, there was some amount of bunching of all those flows and that is how the rupee reacted yesterday and pulled back.

Q: Any indicative numbers, could it have been a billion or couple of billion dollars which might have got converted?

A: I don't have a good feed of the numbers at that point of time but I don't think it will be as large as the couple of billion at that point in time. I think it would be more like USD 400-500 million at that point of time.

Q: Do you expect any meaningful pullback in the next few days or do you think it will grind around this 56 kind of zone?

A: Our base case view would be it would grind around this. It will all depend on the global sentiment, it will move along with global sentiment over the next few days or over the next month.