Fundamental Outlook on Rupee: Friday, September 28, 2012

(By India Forex Advisors Research Team)

"Taking cues from the rising flows into India and a cut in the withholding tax, the rupee started the week on a positive note against the US dollar. The rupee was supported by the FII flows into Indian markets which amount to $1.95 billion for the current month.  However the gains in the rupee were restricted by the  Euro which started coming down on account of poor data from Germany.

Later in the week, the rupee traded on lower note as European debt concerns continued to persist with Spain and delaying the ESM bailout. On the domestic front,  the rupee was seen falling after the news of Cairn Energy selling its stake in Cairn India. This has resulted in $940 million outflows from India. 

However, the Indian rupee started appreciating on account of dollar selling by the Indian corporate. A state run Power company was seen selling dollars worth $500 million. The company is supposed to have raised this amount by issuing bonds (ECB).  This triggered heavy dollar selling and made the rupee to appreciate against the US dollar. The gains continued after a recovery in the Euro as Spain announced spending cuts in its budget 2013. Fundamentally, we expect Rupee to head back again to 54 once the short term euphoria is finished."

(Source: Corporate Communications Team, India Forex Advisors Pvt. Ltd.)