Difficult to marry fundamentals with market moves: HDFC Bk

It is becoming increasingly difficult to marry fundamentals with market movements, says Jyotinder Kaur, economist, HDFC Bank.

Talking to CNBC-TV18, she says that it is difficult to defend any market levels at this stage as there is a negative spiral unwinding propelled by global factors, which have taken over from domestic factors. Also read: Nifty closes below 5600 ahead of expiry, rupee hits 60.71/$ In the last couple of weeks, global factors also have had a huge role to play with the depreciation of the rupee, she says. Below is an edited transcript of her interview with CNBC-TV18 Q: What are you noticing in the market now? A: This actually been a trend for a while now. It is becoming increasingly difficult to marry fundamentals with market movements. At this stage it seems like a negative spiral unwinding and the global factors sort of taking over from domestic factors. It is difficult to defend any levels at this stage. Q: If you have managed to look at the other emerging market (EM) currencies as opposed to the rupee today, what we have seen seems pretty much domestic in nature. We haven’t seen this sort of trepidation seeping into even the Asian currencies today and not mention the EM currencies which we have been following.  What would you then attribute this domestic weakness to? Is it just a lot of pessimism on the current account deficit worsening? A: I would say so and I wouldn’t really call one day as a trend. It is important to sort of realise that over the last couple of weeks global factors had a huge role to play with the currency. I do think that there are vulnerabilities that India always had that have come into focus and it so happens that the capital account has been far more responsive to the withdrawal of global liquidity than the current account. It will take some time for the current account to sort of diminish to the level that we anticipate. We are anticipating the current account gap to come down to 4.5 percent of gross domestic product (GDP) from possibly 5 percent last year. Unfortunately though the speed with which this happens may not be enough to assuage concerns on the balance of payments (BoP) as a whole.