Re can appreciate if equity momentum continues: BoA

Jayesh Mehta, MD & country treasurer, Bank of America, says that the cut in withholding tax will help people to borrow at a better pricing. If the equity momentum continues, then we will see the rupee to going lower than 54.

Below is the edited transcript of his interview to CNBC-TV18.

Q: What is your view on how much boost the currency will get because of the news of the withholding tax issue?

A: Cut in withholding tax will help people to borrow at a better pricing, but I think for the currency movement, initially people have to wait for the notification; weather is it only for foreign currency borrowing or also for rupee-bond? If the notification is not for rupee bond then nothing will change from the currency perspective. I think rupee movement is more to do with equity flow which is huge in India.

Q: What do you see as the next move on the rupee now, is there a slim chance of the rupee reversing its gains this time and do you see a firm base at this 54 level?

A: If the equity momentum continues, then we will see the rupee to going lower than 54.  The withholding tax is a good move for the corporate but I don’t think it will change much unless the withholding tax on rupee bond changes, that would be a much bigger move like an FII in equity, that would bring in lot of FII in debt too. Right now, we are watching equity flows and if the momentum continues, rupee can appreciate much further.