Indian rupee's value may deteriorate beyond 55 on Budget 2013, soon: Goldman Sachs
"With risks to the net borrowing requirement from the budget to the upside, and no major proposals in the budget to reduce the current account deficit (CAD), we think there are depreciation pressures for the INR in the near-term," Goldman Sachs Managing Director and Chief India Economist Tushar Poddar said in a research note.
According to Goldman Sachs, the three-month, six-month and 12-month USD-INR forecasts are 55, 53 and 52 respectively, with risks of further depreciation beyond 55 in the near-term.
Currently, the rupee is hovering around the Rs 54 level against the US dollar.
The headline numbers announced by the Union Budget are in line with expectations, but the composition of the reduction - based on optimistic revenue increases rather than spending cuts - was a disappointment, the report said.
That, along with no new major reform proposals, suggest to us the budget could have a short-term negative effect for Indian equities, bonds, and the INR.
The fiscal trajectory has materially changed for the better over the past few months due to a front-loading of consolidation, and the government's debt ratio remains on a declining path.
"We think the consolidation may not be material enough to provide space for the RBI to enact a significant amount of rate cuts," Poddar said.
"With the RBI sounding hawkish on suppressed
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