1. Narendra Modi ‘magic’ in UP polls means Indian rupee won’t hit 70 any time soon

Narendra Modi ‘magic’ in UP polls means Indian rupee won’t hit 70 any time soon

The Narendra Modi brand of 'magic' seems to have worked wonders not only for the BJP but also for the Indian equity markets and the rupee!

By: | Published: March 14, 2017 12:43 PM
forex rate, modi rupee, modi up polls The fact that the rupee has strengthened substantially gives analysts the confidence that the currency will not touch levels of 70 anytime soon. (Reuters file photo)

The Narendra Modi brand of ‘magic’ seems to have worked wonders not only for the BJP but also for the Indian equity markets and the rupee! The Indian rupee appreciated as much as 44 paise versus the US dollar today when markets opened after the Assembly election results. The rupee touched a high of 66.16 per US dollar, soaring to a 1-year high on the back of BJP’s massive victory in Uttar Pradesh, the country’s largest state. The fact that the rupee has strengthened substantially gives analysts the confidence that the currency will not touch levels of 70 anytime soon.

Says Jamal Mecklai, the MD & CEO of Mecklai Financial, “Thanks to the Master called Modi, the rupee has broken its resistance and has appreciated. Earlier the range that I had defined for rupee was 66.80 to 68. But now, thanks to Modi’s masterstroke in state polls, the range has gone down by a full rupee, that is between 65.80 to 67.” “That’s the range I see the Indian rupee moving in for some time, but one has to keep in mind external factors as well such as the Fed rate hike,” Mecklai told FE Online.

Sajal Gupta, Head Currencies at Edelweiss Securities also doesn’t see the rupee hitting 70 anytime soon. However, Sajal Gupta cautions that the rupee is unlikely to appreciate any further and may come under pressure due to global factors in the coming months. “I see the Indian rupee moving between 66 to 67.50. This is because the markets in my view are overreacting to BJP’s win right now. The euphoria is slightly overdone,” Gupta told FE Online. “The rupee is overvalued right now and is unlikely to appreciate further. The US Federal Reserve is likely to hike rates this week. That event would strengthen the dollar, putting pressure on the EM currencies including the rupee,” Gupta added. Gupta further believes that upbeat global commodity prices and a possible border tax by the US may add to dollar strength implying a depreciation pressure on the EM currencies.

Also read: Modi win to boost stock markets; 10 great stocks to buy now for big gains

Yet another currency analyst, who did not wish to be named, told FE Online that the outlook for rupee may undergo a revision once the US Fed rate hike happens and markets’ euphoria on BJP’s victory settles. But, the rupee is less likely to head towards 70, the analyst said.

Meanwhile, traders are of the view that the gains in the rupee have already prompted the Reserve Bank of India to intervene. Modi’s victory “is a huge confidence boost for reform and is another step on the way to a story that could place him as one of the most successful reformers in history,” Reuters reported Simon Quijano-Evans, investment strategist at Legal & General Investment Management in London as saying.

Analysts are hopeful that with BJP winning the UP polls, the Narendra Modi government would feel more confident of winning the 2019 polls. This would encourage it to undertake key economic reforms, they believe.

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