Stories
Rupee May Plunge to 99 Against Dollar if Key Level Breaks: Kotak Securities Warns
- •The Indian rupee could weaken to 97 against the US dollar in the near term, potentially falling to 98.5-99 if the 97 level is breached, according to Kotak Securities.
- •FPI outflows of around $6.1 billion this month, higher import costs, and elevated global yields are pressuring the rupee.
- •Recent FCNR(B) inflows have not significantly boosted the rupee as funds largely went into RBI reserves rather than directly into the market.
- •Rising spot crude prices, freight costs, and refined product prices, particularly diesel and aviation fuel, are increasing India's import bill and adding to inflationary pressure.
- •The RBI is expected to raise interest rates in the coming months, possibly more than once, focusing on domestic inflation and maintaining positive real interest rates.
Key Questions Answered
According to Anindya Banerjee of Kotak Securities, the rupee is facing pressure from foreign portfolio investor (FPI) outflows, higher import costs, and elevated global yields. Additional pressures stem from soaring spot crude prices, freight costs, and global refinery bottlenecks that keep refined product prices high.
Anindya Banerjee stated that the Indian rupee could weaken towards 97 in the near term and may slide further to the 98.5-99 range if that critical 97 level is breached.
Kotak Securities expects the RBI to raise interest rates in the coming months, supported by the liquidity cushion from recent foreign currency inflows. Banerjee anticipates the possibility of multiple rate hikes, including another increase in December, with a primary focus on domestic inflation and maintaining positive real interest rates.
