Ananth Narayan, Standard Chartered Bank expects rupee to continue trading in the range of 58-61 per dollar. According to him medium-term trend will remain murky for rupee and thus positive news on the growth side is required to increase the FII Flows.
Ananth Narayan, Standard Chartered Bank expects rupee to continue trading in the range of 58-61 against the dollar. According to him, the medium-term trend will remain murky for rupee.
He believes positive news on growth side can repair the foreign institutional investors (FII) flow situation of the country.
He told CNBC-TV18 that he is not expecting any sudden fall in current account deficit (CAD), instead there is a possibility of gradual decline in it.
Narayan sees re-rating of EMs in the near-term.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What did you see that led to the pullback in the rupee and where do you see it stabilise at now?
A: I think the next few days will remain with the prospect of these one-off capital flows coming in. I think the market will continue to talk about these flows coming in and that should keep the rupee well behaved for the short-term. This is also coming on the back of sharp 12-14 percent depreciation in the rupee in the last couple of months.
However, there will be some amounts of stability in the short run on the back of these capital flows. There are a few more in the offing as well, but the medium-term still looks murky because end of the day we still had USD 7 billion of foreign institutional investors (FIIs) outflows the last month.
We not only need to stem these outflows, we actually need fresh inflows to come in to meet the current account deficit on monthly basis. We are still some distance away from that stability and that confidence coming back. So, for now we play on a stable to strengthening rupee.
Q: The problem is with the outflows anecdotally what you are hearing still about outflow pressures both from the equity side and whether the bond side is still seeing a lot by way of money going out?
A: There is still nervousness. Reality is the sharp one-sided volatility that we saw in the rupee the last 45 has taken people by surprise. Fx has been as volatile as it is the prospects of rate cuts in the near future have diminished quite a bit. Therefore, to that extent there is nervousness on the debt side.
Equity side while we did see some outflows last month. The real risk is that if, Fx was to spiral out again after a few days, we could see some real nervousness emerging there as well and that could be bad news for us. So, at the moment there is still nervousness. Global factors are not looking too hot and India specifically seems to have exacerbated issues on volatility and that stability is missing for now.
It can change, we can see flows coming back again but we need good news on the growth side. We need those projects to be cleared and some more reforms to come through including from Competition Commission of India (CCI) and of course we need some amount of stability in the Fx markets.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.