Govt action aiding Re momentum; see Re at 53/USD soon: HSBC

In an interview to CNBC-TV18, Arjuna Mahendran of HSBC Private Bank gives his expectations for the rupee. He expects the rupee to be at 53/USD soon. The rupee today gained 41 paise quoting 53.98/USD.

On cash flows into the market, Mahendran says the market's mood is pretty much risk-on since quantitative easing (QE) three. "There hasn’t really been much of a tremble in the markets ever since. This I attribute to the fact that all the other major central banks joined the bandwagon. So, we had the British Central Bank, the European and the Swiss and the Japanese Central Bank all joining the fray which means we have created about USD 11 trillion worth of new money since the crisis in 2008. That’s a significant amount of money and it has to go somewhere," he says.

Q: There are tremendous cash flows coming in for this market right through December and in January as well. What's your sense of how liquidity is positioned right now and whether the mood is risk-on or risk-off?
A: We pretty much had risk-on since Quantitative Easing three (QE3) was announced in September last year. There hasn’t really been much of a tremble in the markets ever since. This I attribute to the fact that all the other major central banks joined the bandwagon. So, we had the British Central Bank, the European and the Swiss and the Japanese Central Bank all joining the fray which means we have created about USD 11 trillion worth of new money since the crisis in 2008. That’s a significant amount of money and it has to go somewhere. That money chasing few investment opportunities will continue to drive up asset prices. I don’t see any real problem there.
The other point is that last year we had a rush of elections in significant countries like the United States (US) and the leadership transition in China. All that pretty much went according to the book. So on the political side in terms of political risks impinging on the economy and on markets we have a fairly benign scenario coming into 2013. So the confluence of the good politics and reasonable liquidity means that we can see further upside in most markets. More to come.