DH Poll: Rupee may test 74-level by March

The Indian rupee, which has been a worst performing Asian currency in the last one month, is likely to depreciate further and hover in the range of 73-74 against the US dollar by the end of the current fiscal.

A majority of 15 economists polled by DH are of the opinion that the rupee is likely to stay in the range of 73-74 by March 2020, largely on account of foreign fund outflow and weak macro-economic outlook.

As many as 10 economists opined that the rupee will be trading higher than 73 against the greenback by the year-end. The remaining economists expect the rupee to be in the range of 71 and 72, and expect that the Reserve Bank will intervene in case it depreciates further.

"A sharp growth slowdown, earnings disappointments, regulatory indecisiveness and lack of adequate policy support by the government exacerbated the currency movement... Our base-case assumption is that the recent policy responses, with possibly more ahead, should help support India's growth outlook. While the UBS India financial conditions index suggests growth likely troughed in the June 2019 quarter, we believe the recovery cycle will be elongated and below market expectations," said Tanvee Gupta Jain, Chief India Economist at UBS.

Many others, like Gaurang Somaiya, currency analyst at Motilal Oswal, suggest that the weakness in Yuan has also been impacting the rupee value.

"Escalating trade war between US and China, Yuan depreciation and slower global growth are expected to keep the rupee under pressure in the near term despite various efforts taken by the government on the domestic front, to stimulate the economy," he said. He expects the rupee to be in the range of 69.5 to 73.5 against the US dollar by the year-end, with the odds tilted towards the higher side.

However, there are some economists who believe that the government has deliberately kept the rupee overvalued in a bid to contain the import bill. "My estimate says that rupee will be at the level of 75 by the year-end, and still overvalued. The rupee is still overvalued by 16%," said Govinda Rao, Member, 14th Finance Commission.

Some others, like Madan Sabnavis, Chief Economist at Care Ratings, are of the opinion that the policy stability will also play a key role in retaining the foreign investors.

Since August beginning the rupee has dropped by 4.88% till Wednesday.

While FII debt inflow has continued, FII outflow from equities has been to the tune of $4.2 billion (Rs 35,000 crore) since July 2019.