BENGALURU, Sept 2 (Reuters) – The Indian rupee will hold near current weak levels, a Reuters poll of strategists found, although foreign currency deposits from non-resident Indians give the Reserve Bank of India further scope to intervene to limit depreciation.
Measures the RBI announced in June to attract foreign capital lifted its foreign exchange reserves to a record of more than $729 billion in the week to August 21.That places the onus on the RBI to take further action as the partially convertible rupee is down over 5% against the dollar for the year.
Foreign investors have sold more than a net $24 billion of Indian equities so far this year despite stronger-than-expected economic growth of 7.8% in the last quarter.
Global uncertainty has weighed generally on emerging market currencies, while the U.S. dollar looks set to maintain a holding pattern against most currencies in the coming months, analysts say.
SUSTAINED BEARISH OUTLOOK
According to the median forecast of 35 strategists polled between August 31 and September 2, India’s rupee was forecast to trade near current levels at 95.49 per dollar in three months and 95.89 by end-February.
A year from now, the survey expected the outlook would become more bearish, with the rupee forecast to weaken nearly 2% from current levels to 96.78 per dollar, close to a record low.
Dollar reserves have given the RBI comfort it can sell more in the market. So they will not allow the rupee to depreciate in a big way, that is for sure. 95.50 or 95.75 could become a cap for the next three to six months,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
Bhansali said the economic growth figure in theory should have attracted more money into equities in India, but that had not happened.
A separate Reuters poll published last week showed equity analysts had lowered their outlook again for Indian stocks as foreign funds sought cheaper or more technology-focused markets elsewhere in Asia.
“That disconnect between the growth and the stock market should continue in the coming months,” Bhansali said.
While the RBI’s large FX reserves can curb near-term rupee volatility, a persistent shortfall in foreign direct investment is likely to keep the rupee under pressure.
“Gone are the days when we can account for $35 billion to $40 billion of FDI. They will more be in the region of $5 billion to $10 billion,” said Indranil Pan, chief economist at Yes Bank.
(Other stories from the September Reuters foreign exchange poll)
