Ashok Gautam of Axis Bank rules out speculative trading as the reason for the sudden slide in the rupee. The rupee beached 57 mark midday on Friday and is close to reaching June 2012 lows.
Sustained buying by some multinational banks and the Nikkei tumbling in the morning could have impacted our currency market, he added. He sees rupee touching around 57.34 or 57.37 next week.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: What happened suddenly, is this an Foreign Institutional Investor (FII) kind of selling that you noticed in the market, is the Reserve Bank of India (RBI) anywhere in the picture at all?
A: Yes we are seeing sustained buying by some of the multinational banks so that could be related to some kind of outflow which is taking place from the country. So this is what we have observed and all this seems to have been triggered since last night and in the morning when we have seen that Nikkei has taken a tumbling. So all this is actually impacting our market also severely.
Q: But we held out somewhat in morning trades, rupee was actually higher than the previous close, has this got something to do with the governor’s speech where he seemed to indicate that although they were textbook statements but nevertheless they were strong statements that the RBI should intervene only when it is sure of controlling the currency, and it is terrible to intervene and loss the battle and it would be better not to intervene at all or things to that effect I am not quoting him verbatim. Has this got anything to do with the hawkishness of the governor or anything that you took away from his statements or is this outflows of a different nature?
A: Sometimes when these kind of comments come from RBI then market interprets it in a way that this level is fine and may be they might take their own time to get in the market to intervene. Then we see exporters staying away and importers rushing in. So sometimes when such comments come in importer and exporters take opposite positions; importers actually rush in and exporters do not come in. This actually puts pressure on the rupee.
Now we are seeing that the earlier level where rupee actually was around 57.34 or 57.37 that might come may be in next week.
Q: How much of this is pure speculative trading especially the last few minutes of sudden slide that we have seen in market?
A: I will not like to use the word speculative trading. Currency market also moves on the basis of various information flows and suddenly you see the corporates rush in or people try to take position. So you see the impact of that news on the currency. Now with various measures have been taken by the RBI over the last one and half year speculative trades essentially are not there.
Q: What is the sense you are getting -, was the stock market fall led the rupee fall or was it the other way round?
A: Essentially, when stock market falls and if foreign players are taking out their money then certainly there is demand for dollar so it has its impact on the rupee. That could be one of the triggers which we have seen.
Q: What about PSU banks, what are they doing right now, were they buying all along, are they selling right now?
A; Most of the time we have seen that this is a two-way movement, there is continuous buying and selling but it all depends what is the pressure.
Q: Are you noticing any different activity?
A: I have not noticed any unusual activity.
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