Rupee may touch 55 levels in near term: Nick Parson

Nick Parsons of National Australia Bank, says that it is right time for investors to book profits. Many investors and investment managers have not fully participated in this rally, they will be keen to buy on dips in order to flatter their Q3 performance number which comes in early October.

The dollar-rupee in the near-term is unlikely to be back above 55 and there will be rupee buyers if we approach that level. The jitters of the second quarter are behind us. We have consolidated in the Q3 and the stage is set for global investors still planning to buy the currency. Below is the edited transcript of his interview to CNBC-TV18. Q: Do you think the time is ripe for profit taking from where we can again build on?
A: I think it is right time for investors to book profits. From quarter till date, gold is up 10%, crude oil 16% and silver 25%. It is to be noted that many investors and investment managers have not fully participated in this rally, they will be keen to buy on dips in order to flatter their Q3 performance number which comes in early October. People who have been long into this rally will go for profit booking. Majority of investors have missed it completely and they will buy on dips. Q: Can something destabilize this kind of bottom that Draghi appears to have put by taking out the risk element from the eurozone? Is it possible that Spain will struggle more than all of us expect to get broad political consensus for going out and asking for a bailout or Greece can spring a surprise because it’s consistently falling behind its creditors’ demands?
A: It's more likely that the disturbance comes from Spain rather than Greece, because Merkel has been making some very friendly noises towards Greece over the last week and that should be enough to prevent that from flaring up. Spanish 10-year yields last week were down at 5.6%.
Today, the yields are down at 6.05%. So, we are up 55 bps at a time when in general people are feeling good about risk and European sovereign debt crisis. There is a very good correlation between currency markets between the external value of the euro and Spanish bond yields and that correlation has worked for both commodities and for EM equities. In Spain we might be in one of those phases where it’s a question of buy the rumor and sell the fact. Now, all the good news are out of the way and there is no more great deal to go for in Spain and that’s more likely to be the trigger for a short-term move downwards. Q: A small debate is brewing in India that rupee might have found the bottom. We have decent foreign inflows. Some analysts point out that the RBI itself doesn’t want rupee to appreciate beyond a point. How will the bias be like, given the central bankers’ stance and the kind of inflows we are seeing?
A: It is encouraging to see that we are above 54 on dollar-rupee. Currently, the rupee is at 54.05 and the resilience of the currency is a positive and it shows that there is still international demand and global investors are seeking to reduce an underweight position in India. 
India scared many international investors in the second quarter of this year. It has regained some poise in the currency markets over the last quarter and on a balance people trying to reduce their underweight position. The dollar-rupee in the near-term is unlikely to be back above 55, and there will be rupee buyers if we approach that level. The jitters of the second quarter are behind us. We have consolidated in the Q3 and the stage is set for global investors still planning to buy the currency. Q: What is the in house view if you please on crude? We saw that big fall yesterday as the October options expired. Do you think crude will not benefit as much from QE as other risk assets will considering that practically all economies are in a downbeat or in a slowdown mode?
A: Yesterday, there was a flash crash when Brent crude slipped USD 4 in four minutes. In June crude was trading below USD 90. Friday, last week in the immediate aftermath of QE crude was USD 118. In 13 weeks, we saw a 30% increase in the space. We need to see if global growth forecast being revised substantially higher in the wake of QE3 to see crude back in the USD 125-130 area. There is no need to chase crude beyond USD 115, if we have global GDP growth at 3.25-3.50%, India growth at 5-6% and China growth at 6-7%. So, in near term it looks that we have touched a peak.