Rupee inches back on RBI hand, petrol price-hike: IndusInd

As the rupee inches back to firmer levels, Rajeev Mahrotri, head-trading, global market, IndusInd Bank, explains to CNBC-TV18 that it was the RBI's intervention, by supplying dollars, and the increase in petrol prices by the government that rescued the rupee.

Mahrotri forecasts that in the long-term, the dollar-rupee will continue to trend upwards. He advises a wait-and-watch approach on the expected course events in India and Europe. Also Read - GDP, rupee, inflation, petrol: Is Nifty in for a knockout? Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: What would you attribute the recovery in the rupee?
A: The recovery could be attributed to several factors. One, the RBI tried to supply dollars to address the short-term mismatch between supply and demand. Secondly, petrol prices have been hiked to infuse confidence on a longer-term level.
Finally, the past depreciation of the rupee is probably exerting its influence in slowly decreasing the current account deficit and the substantial slump in gold imports. Q: What was the need for the RBI to intervene? Is it trying to take advantage of the slight pull-down in the dollar index and slight recovery in the euro?
A: I think what the RBI was trying to do is supply dollars considering the high opening levels of dollar-rupee this morning over yesterday's close.
Q3: Is 56 a base for the rupee or do you think today's recovery is just a temporary respite?
A: I think the long-term trend in dollar-rupee will still continue to be upwards.This particular correction should drive it down to about 54-54.25 and then a wait-and-watch mode is to be adopted because there are a lot of events lined up.
Greece is slated to hold elections soon and this is very important as it will indicate how the EU countries play out in the run up to the polls. Also in the pipeline are additional measures from the RBI and government initiatives specific to the dollar-rupee.
Next is the government's initiative in adding positive momentum to FDI and a probable restriction of further import of gold. The current mood should drive the rupee down to about Rs 54.25. Q: A quick word on the bond markets and the pressure on the 10-year bonds today?
A: The sell-off is due to the run-up to the auction and on the fears that one of the 8.79% papers would be replaced by new benchmark and then turn illiquid.
But I think, given the fact that RBI will continue doing OMOs (open market operations), 879 would be a pretty big target for OMOs. It's overdone and probably the bonds could be bid. My near term call would be for 10-year bonds to head down to about 8.40%.