The rupee clearly dominated headlines and mind space this week. The currency not only set new lows most days of the week, it fell with such rapidity. Currently it is down 3.12% on the week and 14% year-to-date (YTD) i.e. April 1. That compares with only a 0.2% gain in the Nifty this week and just a 2.8% fall YTD i.e. April 1.
The rupees fall is intriguing since it has come despite a 27% fall in crude prices from April 1 i.e. YTD. So why is the rupee getting singled out for such attacks? How will other macros in the country like the current account deficit and fiscal deficit change because of the rupee? More importantly, where and when does the rupees fall get arrested?
CNBC-TV18s Lata Venkatesh speaks to Samiran Chakraborty, chief economist at Standard Chartered Bank, Ajit Ranade, chief economist at AV Birla Group and Moses Harding head of treasury at IndusInd Bank to discuss the challenges ahead for the rupee.
Below is an edited transcript of their interview. Watch the accompanying videos for more.
Q: The stock market has fallen barely 3% from March 31 for the year FY13 and on the week actually its a minor gain. Why is it that the rupee has fallen actually by about 14% YTD? In the stock market, people are giving credit to the fact that lower commodity prices, in particular crude is going to improve margins, OPMs and therefore EPS. Should not the same credit be given to the rupee? Why is the rupee such a rank underperformer?
Chakraborty: The focus of the market at this point in time is not on crude at all from the FX market perspective. Its more looking at global events and event risks globally. Partly also looking at the dollar strength across the board that is impacting the rupee and partly the issue of a fear of a ratings downgrade, a balance of payment (BoP) crisis situation, a kind of macro instability.
All these are affecting investor sentiment on the FX market particularly. The fact that there has not been very strong intervention from the