By Gaurang Somaiyaa
Indian rupee consolidated in a broad range of 71.50-72.20 for a month ahead of the release of GDP and fiscal deficit numbers last week. During the period marginal appreciation was seen as foreign investors continued to pour funds into the equity segment for a third successive month.
In November, FIIs invested $3.5 billion compared with inflows of $1.7 billion in the previous month. In the last three months, FIIs have poured over $6.3 billion into equities, thereby keeping momentum positive.
The currency was resilient to the growth numbers, and despite disappointing GDP data, rupee didn’t move lower against the US dollar. Moreover, fiscal deficit in the first seven months through October stood at Rs 7.2 lakh crore ($100.32 billion), or 102.4% of the budgeted target.
On Thursday, the Reserve Bank of India released its money policy statement and held rates, but decided to maintain stance as accommodative. The central bank expects inflation to rise to 5.1-4.7 per cent for the second half of FY20 and 4-3.8 per cent in the first half of FY21, with risks broadly balanced.
Real GDP growth for 2019-20 has been revised downwards from 6.1 per cent to 5 to 4.9-5.5% in the second half and 5.9-6.3 per cent in the first half of FY21. The committee recognised that there was space for future action.
However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture. We expect that the momentum in rupee could remain slightly negative, but the gains could be capped at 71.20 (spot) and on the lower side support is at 71.80.
Source: economictimes.indiatimes.com