| Date: |
07-03-2016 |
| Subject: |
Economists roll back forecast of rupee's fall with FM Jaitley sticking to fiscal deficit roadmap |
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MUMBAI: Traders and economists rolled back their forecast of a slide in the Indian rupee to the US dollar and said bonds could rally after the finance minister Arun Jaitley unexpectedly stuck to the fiscal deficit roadmap even as he raised spending on irrigation and road building.
Those who expected the rupee to slide to as low as Rs 72 to the greenback, are now saying that even if global financial markets turn wobbly, the Indian currency's downslide could just be limited to Rs 70, shows a poll by ET.
Benchmark government bond yields which were supposed to remain above 8%, are now expected to sink to as low as 7.15%, the poll showed. Bond prices and yields move in opposite direction. "The government's commitment to fiscal consolidation should also encourage further inflows to government bonds when the quota (investment limit) is increased in April," said Anubhuti Sahay, senior economist at Standard Chartered Bank. "It has helped allay concerns of further outflows from bond markets.''
Investor mood appear to have decisively turned after the Budget did not contain anti-market plan like raising the time period to three years for capital gains tax exemptions and many taxes on the rich. Also, the prudence in sticking to the fiscal deficit target of 3.5% for the next fiscal after meeting this year's has fuelled the hopes that this government won't go bust for growth.
Since Budget the day, the Sensex has gained more than 7%, or 1,644 points, while the benchmark bond yields dipped 13 basis points.
During the same period the rupee gained 2.4% against the greenback. Jaitley has allocated a whopping Rs 5.40 lakh crore cumulatively in different rural schemes/projects to improve infrastructure. The government will also spend as much as Rs 2.21 lakh crore in creating and upgrading roads and railways infrastructure in the next financial year.
"The Budget has changed the market mood," said Shubhada Rao, group president, Yes Bank. "The government has laid down expenditure roadmap on roads and railways. This should bring private investments, gradually. "The rural infrastructure focus will add to the country's growth via job and asset creations that will finally lead to consumption demand."
The sovereign's gross market borrowing would be Rs 6 lakh crore versus Rs 6.30 lakh crore expected earlier, boosting the outlook for bonds.
Source : economictimes.indiatimes.com
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