Since mid-November the Rupee rally is moving towards a pause, due elections in Prime Minister Narendra Modi’s home state of Gujarat, DBS Bank said. “The recent rally in Rupee that started in mid-November is likely to have run its course. Having bottomed at 64.323 on November 29, Rupee is likely to be setting its sights higher at 65 again,” the Bank said, adding tight two-horse race between the BJP and the Congress is making investors nervous.
“Apart from a stronger tone for the U.S. dollar in the region, the rupee will also move lower with Indian equities if investors start fretting about how small the margin of victory will be for Modi and the BJP,” the DBS analysts wrote in Thursday’s note.
A bearish double-top reversal pattern has formed in the Sensex, which is keeping investors nervous due to the Gujarat elections, now seen as a gauge of Modi fatigue, and how much demonetisation and the GST has hurt the ruling party. The Indian rupee closed flat on Tuesday after making a 3-month high against the US dollar in the intraday trade. Recently last week, India’s GDP growth has shown signs of recovery last week at 6.3%.
The Reserve Bank of India (RBI) yesterday left interest rates and its neutral policy stance unchanged at its Monetary Policy Committee meeting. With inflation staying above the mid-point of the 4% inflation target, the RBI is likely to resist political pressure to lower rates to add traction to the growth that just picked up after five quarters of slowdown.
The rupee jumped 1.3 percent over the last two months, with a major boost coming from mid-November’s rating upgrade for India by Moody’s Investors Service. A resounding win for Modi in the nation’s most populous state earlier this year had triggered gains in the rupee, Bloomberg reported.
Meanwhile, asking investors not to panic over the Indian benchmark equity indices shedding 300-350 points from the highs reached in the recent months, famous market expert Ramesh Damani says the market correction is due to the profit-booking happening at the year-end.
Voting for the total 182 seats will take place in two phases — 89 seats on December 9 and the remaining 93 seats on December 14. The results will be announced on December 18.