Upward trend in rupee can see it hit 58/$: IndusInd Bank

From the currency space, the rupee continues to sink lower toughing 55 to the dollar after the stock market closed today. The Indian currency had hit a fresh all-time low of 54.93 to the dollar earlier in the day. Rajeev Mahrotri, head of trading, global markets group, IndusInd Bank says in all likelihood the rupee will possibly touch 56 and later on even 58 to the dollar.

Also Read: As rupee stoops to 55, experts discuss Nifty's movement now

Below is an edited transcript of his interview on CNBC-TV18. Watch the accompanying video for more.

Q: This is the fourth session in which the rupee has touched an all time low. We are right now at 54.99. Where do you predict the rupee is going to fall till?

A: The trend continues to be upwards and we will possibly see 56 and later on even 58. The point is that, the fundamentals that are correcting for India will take time to play out. The imports will slowdown only with a lag. There is an array of event risks lined up. You have the Greek elections on June 17 and then you have much later on elections in the US as well as possible fiscal contraction in the US that kicks in at the end of the year. So, these are really the event risks that one needs to look at and play from that side.

Q: Does the RBI have headroom to intervene? Does it have any ammunition even left to try and prevent the rupee from falling?

A: The ammunition is clearly limited. Even their reserves are dwindling and they probably have just about six or seven months of import cover. They would typically be hoping that the past depreciation in the rupee helps correct some of the fundamentals that I just mentioned and bring about a balancing factor in the current account deficit.

Q: How can the RBI intervene at this juncture? The rupee at 56 or 58 would be uncharted territory but these are just numbers being pulled out of the box. What would you like to see the RBI do?

A: I would definitely like the RBI to slowdown the pace at which the rupee depreciates which is exactly what they are doing. There is a firm realisation within the RBI that they cannot control levels, but just manage the pace and they are doing a good job of that. Beyond that they would be hoping for some kind of contributory help in the form of policymaking by the government. Some of the policy steps the government has taken should play out and help.

For instance, gold import should slowdown which is how the RBI hopes that a correction will happen and that the rupee will find stability somewhere in the 56-57 region. The other factor that RBI can hope for help from is actually an improvement in the global situation. On June 20 we have the Fed meet. It’s quite likely that we would see a third quantitative easing round from the Fed, which can result in risk assets attracting bids and that could improve flows into India even if for a short while only.