In an interview to CNBC-TV18, Ananth Narayan, Standard Chartered Bank spoke about his reading of the Indian rupee and his expectation from this month’s the RBI credit policy.
Below is a verbatim transcript of the interview.
Q: How are you calling the rupee for the next few weeks and for 2014?
A: Next few weeks should be reasonably stable. I expect it to remain in the range of 61.50-63.50 a dollar. But as with every other asset class, clearly, there is going to be a huge volatility with the election results later this year. So it’s very difficult to call on every asset class beyond elections.
For the time being, rupee has performed extremely well since September with the improvement in the current account deficit (CAD) with the success of the Foreign Currency Non-Residential (FCNR) (B) scheme, with the other measures Reserve Bank of India (RBI) has taken, I think that will limit any losses in the rupee even if you see tapering coming through.
The market is far better prepared on the rupee for tapering to come through. There will be concerns though on what the election results will look like eventually and therefore what the trajectory going forward will remain like.
Q: The RBI announces its decision on rates later in a month but somewhere in the midway all the key inflation data comes out and interestingly enough the last time around they pointed out that they will be data driven in the sense they could move in an intermitting fashion as well. What would qualify as a shocker you think in all this data that we have seen in the middle of the month and what kind of impact could it have on the rupee?
A: The broad expectation is that the inflation print will come a lot softer this time around clearly the softening in vegetable prices is visible for all to see. Very rough math is a 10 percent down in the vegetable prices or to translate about 40 bps reduction in the consumer price index (CPI). So we are looking at CPI at about 10 percent or maybe even below that right now.
To that extent we don’t expect a shocker to come through. We don’t expect rates to be hiked in this particular round at least. If the RBI desisted that the last time around with more than 11 percent print on the CPI, it should desist on 10 percent print on the CPI. Likewise, wholesale price index (WPI) will probably come below 7 percent. Anything outside of that would be a shock to the system.
A rate hike at this stage would be a huge shock and sort of add to the uncertainty, which is there in both the bond markets as well as the rupee markets.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
