My earlier analysis of 7th Jan 2015 had indicated that i expect the Rupee to get weaker against the US Dollar. Currently the Rupee sits comfortably above 64 Rs against the Dollar. I look at an approximate target of 66 and higher. From that point on, one can look at starting to sell USD and buy Rupee.
My assumptions on the Economic front are based on the fact that the new government in India for the last one year has been working very hard internally on simplifying rules and policies for foreign investment, and at the same time working hard abroad to attract investment. A simplified policy and rules regime, and an active bureaucracy and government bode well for foreign investments. Many contracts have already been signed with various countries and in various sectors. This money will now start flowing into India. The initial flow will be at around Rs. 66 or higher. By initial flow i mean the first 10 to 30 Billion USD would come at around the rate of 66 or so. However the subsequent flows will see the rupee strengthen and will be only at around 58-62 range. Then i see a continuous strengthening in the Rupee for a long time to come. The Rupee will gradually drift and stay between 48 and 52.
The second factor that will contribute to the strengthening Rupee is the return of Black Money. The government has been working on putting laws, agreements and processes in place that will start giving results. Most likely minor results will be achieved by the end of this year 2015. This would have a major psychological impact. As more and more money is recovered from abroad as well as from within the country, the Rupee will strengthen.
India focusing on development and attracting foreign investment and technology will be wanting to have a stronger Rupee which makes the imports cheaper. All major companies in India will want a stronger Rupee and will thus pressurize the government and RBI to keep policies in place that keep the Rupee strong. Paying back loans taken in USD also becomes cheaper if the local currency namely Rupee Strengthens.
To play a stronger regional role India will need a stronger currency and which will reduce dependency on USD.
In addition fundamentals of the Indian economy like inflation, fiscal deficit, budget deficit etc are all on target and government has already achieved them for this year. Strong fundamentals means strong currency.
Lastly technically speaking i am reproducing the chart from 7th Jan below which also indicates that the Rupee will strengthen.
We can see that the 61.8% retracement is at Rs.50.35.
My assumptions on the Economic front are based on the fact that the new government in India for the last one year has been working very hard internally on simplifying rules and policies for foreign investment, and at the same time working hard abroad to attract investment. A simplified policy and rules regime, and an active bureaucracy and government bode well for foreign investments. Many contracts have already been signed with various countries and in various sectors. This money will now start flowing into India. The initial flow will be at around Rs. 66 or higher. By initial flow i mean the first 10 to 30 Billion USD would come at around the rate of 66 or so. However the subsequent flows will see the rupee strengthen and will be only at around 58-62 range. Then i see a continuous strengthening in the Rupee for a long time to come. The Rupee will gradually drift and stay between 48 and 52.
The second factor that will contribute to the strengthening Rupee is the return of Black Money. The government has been working on putting laws, agreements and processes in place that will start giving results. Most likely minor results will be achieved by the end of this year 2015. This would have a major psychological impact. As more and more money is recovered from abroad as well as from within the country, the Rupee will strengthen.
India focusing on development and attracting foreign investment and technology will be wanting to have a stronger Rupee which makes the imports cheaper. All major companies in India will want a stronger Rupee and will thus pressurize the government and RBI to keep policies in place that keep the Rupee strong. Paying back loans taken in USD also becomes cheaper if the local currency namely Rupee Strengthens.
To play a stronger regional role India will need a stronger currency and which will reduce dependency on USD.
In addition fundamentals of the Indian economy like inflation, fiscal deficit, budget deficit etc are all on target and government has already achieved them for this year. Strong fundamentals means strong currency.
Lastly technically speaking i am reproducing the chart from 7th Jan below which also indicates that the Rupee will strengthen.
We can see that the 61.8% retracement is at Rs.50.35.
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