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Rupee may slide to 44-1$ level in next six months, reveals StanChart survey

Indian corporates do not see any significant turnaround in the equity market performance and suggested that the Indian rupee would steadily be depreciating towards the middle of next year.

According to a survey of more than 100 treasurers in eight principal cities conducted by Standard Chartered Bank on the equities front, corporate players were unwilling to bet on anything more than a modest reflexive rally. They are not too optimistic with the real economy's prospects for the next six months.

While there is little disagreement that the Indian rupee is headed lower by end-May 1999, a probabilistic assessment of the respondents indicates a roughly bell-shaped curve with 50 per cent predicting the rupee to be in the range between Rs 43.50 and Rs 44 per dollar. As such, the bias of the distribution points, with median at Rs 43.70, is oriented towards the left of the dispersion range.

The survey's findings on the onshore swap premia also corroborate such a viewpoint. Nearly three-fifths of the respondents expect the six-month annualised premia to range between 7.5 per cent to 8.5 per cent in February, down from expectations of ten per cent six months ago.

The view is similar for May 1999 as well.

On the interest rate front, there is a general consensus that base lending rates will remain range-bound in the next six months. As long as the rupee continues to be under downward pressure and the government's fiscal position unhealthy, interest rates will struggle to fall in India.

The lesser bearish outlook for the rupee in the survey compared to the previous survey in July last, demonstrated the market's confidence in the Reserve Bank of India's exchange rate management policy.

UNI

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