Mumbai– Parliamentary proceedings, coupled with announcements on the upcoming union budget and global cues, are expected to guide the Indian rupee’s trajectory during the coming week, experts said on Saturday.
They pointed out that the currency market participants will keenly follow parliament’s budget session which commences on Tuesday.
“Any signs of a washout in the initial few days will dampen sentiments and dent the rupee,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
He elaborated that an “over-valued rupee” will come under pressure from February 22 onwards as a string of US macro-economic data points released till date are expected to keep the dollar well supported.
The rupee had crashed to an all time low at 68.89 to the dollar in the oversees currency markets on Friday and ended the day’s trade at 68.72.
Domestically, the rupee had closed unchanged from its previous close of 68.47 to a greenback on Thursday. The domestic currency markets were closed on Friday.
“There might be some pressure on the rupee on Monday. We can expect the Reserve Bank of India (RBI) to intervene heavily to stem any wild moves in the rupee’s value,” Banerjee predicted.
“Over the next week, we can see some volatility as the market grapples with uncertainty surrounding the budget and the global market developments.”
In addition, investors will look out for any positive budgetary announcements and news on expected banking sector reforms.
Market participants are hopeful that the central government may increase expenditure, announce tax concessions and pave the way to reduce the NPAs (non-performing assets) levels of the banking sector.
“Sentiments are currently down and any positive announcement is surely going to trigger a relief rally in the equity markets. This rally might spill-over to the currency markets,” Banerjee added.
Even the interest of foreign investors in the country’s equity and bond markets will set the tone for the Indian rupee.
On a weekly basis, the rupee weakened by 23 paise to 68.47 (February 18) against a US dollar from its previous close of 68.23-24 (February 12).
The weakness in the India rupee’s value indicates a massive outflow of foreign funds from the equity and debt markets.
The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) sold Rs.3,307.47 crore or $484.42 million in the equity and debt markets from February 15-18.
Data with stock exchanges disclosed that the FPIs divested stocks worth Rs.2,608.87 crore during the week under review.
According to Hemal Doshi, chief currency strategist, Geofin Comtrade, the spot market has found good support at 68.30-35 and 68.10-15.
“Resistance is faced at 68.80-85 mark, a break from 68.85 level will open upside towards 69.20-25 levels. The trend is on the upside, only risk would be RBI intervention,” Doshi told IANS.
Other market observers cited that the rupee’s value will move in line with the crude oil price trajectory.
“The rupee seems to be on a thin line. Pressure continues to remain on the rupee till there’s no positive movement in crude. A break of either will lead to 67.50 or 69 plus respectively,” Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.
“Multiple statements are being heard on the crude front. But markets now await a real cut or addressing the slump in the crude oil market. This will lift global sentiments and thereby lessen risk aversion,” Sharma added.