Rupee IndiaForex 220812

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS Rupee may hit 60 by June 2013
Rupee may hit 60 by June 2013
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INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS
Table of Contents
IFA Research Team
Amit Pabari amit.pabari@indiaforex.in
1. 2. 3.
Executive Summary.3-4 Pace of the Rupee.... 5-6 Domestic factors affecting the Rupee.......................................... 7-12 International factors affecting the Rupee ..13-17 Risk aversion ..................................................18-23 RBIs stance on the depreciating Rupee.........23-25 Black Swan events.26-27
Anita Joshi anita.joshi@indiaforex.in
4. 5. 6. 7.
Manpreet Kaur Doad manpreet@indiaforex.in
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Rupee may hit 60 by June 2013 Executive Summary: Indian Rupee is entering A New Normal Forex Rate Need some Heading Major Domestic Triggers:
CURRENT ACCOUNT DEFICIT & FISCAL DEFICIT WEAK IIP & HIGH INTEREST RATES INSUFFICIENT OF FDI AND FII FLOWS REGULATORY & POLICY PARALYSIS IN GOVERNMENT POSSIBILITY OF RATING DOWNGRADE UNCONTROLLABLE INFLATION MONEY FLOWING ACROSS SAFER AND LIQUID BONDS FALLING GDP GROWTH SHORT TERM DEBT MATURITY OF $ 147 BILLION BY MAR- 2013. SLOWDOWN IN CHINA HITTING COMMODITY DRIVEN MARKETS STRONG DOLLAR INDEX DUE TO RISK AVERSION STIMULUS MEASURES OF CENTRAL BANK LOSING ITS IMPORTANCE
Major International Triggers:

EUROPEAN CRISIS HITTING EMERGING MARKET FLOWS
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RBIS STANCE:
RBIs Intervention: Introducing policy measures rather than aggressively selling US dollars. RBIs Focus: Curbing periodic volatility rather than controlling the exchange rate. RBIs Priority: Controlling inflation on a priority, even if it means sacrificing growth.
OVERALL OUTLOOK:
Overall, USD/INR displays a bullish trend: We estimate USD/INR to likely continue this trend in FY2013 and target a 58-60 level. We expect the worst case USD/INR pair to make a base around 52.10 levels in the next one year. Indian GDP: We expect Indias GDP to likely to slow down further to around 6% and below. Emerging Markets: India will likely remain an Underperformer across all Emerging Markets. Dollar index and Gold: We expect the Dollar index to remain bullish with our target of 87-89 levels. Gold appears Overbought and may hit $1435. Industrial commodities will likely remain weak. International Currencies: We believe international currencies to remain weak with the Euro having a target of 1.16, GBP 1.50, Yen 85 and the Australian Dollar Parity. US 10-year Treasury yield: We estimate yield should witness 1.20% in FY2013.
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PACE OF USD/INR UNCONVENTIONAL MOVEMENTS SINCE THE 90S AND WILL BE THERE IN THE FUTURE
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Rupee may hit 60 by June 2013 Chart

A B C D E F G
Start Date
1-Jan-95 13-Aug-97 6-Aug-02 9-Aug-04 2-Aug-06 7-Jan-08 26-Jul-11
Closing Value
31.38 35.78 48.90 46.18 46.63 39.26 44.07
End Date
5-Feb-96 19-Aug-98 31-Mar-04 31-Dec-04 24-Dec-07 2-Mar-09 22-Jun-12
Closing Value
37.9 43.10 43.60 43.46 39.28 51.97 57.12
No of Days
254 223 401 102 324 279 249
Movement
Depreciated by 17.20% Depreciated by 16.98 % Appreciated by 10.84% Appreciated by 5.89% Appreciated by 15.77 % Depreciated by 24.45% Depreciated by 22.86%
Legend: The rows A, B, F and G show the steep trend of depreciation in the rupee, while rows C, D and E show the appreciating trend in the rupee.
It is clearly evident that the pace of depreciation has been much steeper than the pace of appreciation since 1995; hence we feel that the pressure of depreciation may continue over the next 1-2 years in an erratic manner even as we see a period of appreciation for a longerthan-expected time. The above chart depicts the major moves (appreciation and depreciation) of the USD/INR from 1996 onwards. The rupee is seen weakening over a period of time against the dollar. It is observed that the pace of depreciation has been faster than that of appreciation. Though the appreciation has taken more time, the percentage change has been lower than the percentage of depreciation. As seen in the above table, row A indicates that the rupee took 254 days to depreciate by more than 17% whereas row C indicates it has taken more than 400 days to appreciate by a mere 10%. A similar situation is seen between rows E and F, where the rupee has taken more than 300 days to appreciate by 15% while on the other hand, it has depreciated by more than 24.45% in 279 days.
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LOCAL INDICATORS SLOWING GDP GROWTH

GDP
60 50 40
USD/INR 52.52
14 12 10 8
44.96
47.18
48.59
46.54
45.29
44.11
45.3 41.31
48.36 43.39
45.85
46.82
USD/ INR
30
11.8
20
9.7 6.7 4.5 1.6
9.4
9.7 6.1
7.3
8.3 6.1 6.5
4 2 0
10 0
5.5
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011 2012 (Est)
Source: Trading Economics, IFA Research
*Rupee Yearly Average taken / GDP Year End Rate
Trend:
Indias GDP growth has declined to 6.1% in the year 2011, which was the slowest since 2003. Generally, when the growth deteriorates, it impacts Rupee movement adversely.
Triggers:
Declining IIP due to high interest rates Reduced capital formation Widening fiscal deficit crowding out private investments.
Outlook:
The growth in the coming quarters is likely to be around 6% or below on account of the global slowdown and a delay in policy action on the part of the Government.
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GDP %
LOCAL INDICATORS WIDENING CURRENT ACCOUNT DEFICIT

CAD (Billion $) 60 50 40
44.96
47.18 48.59 46.54 45.29
USD/INR
52.52 20.0
44.11
43.39 41.31
1.4
-4.5
7.1
8.8 0.8 -10.3 -9.5
0.0 -10.0
30 20 10 0
-11.3
-21.1 -20.0
-29.0
-51.8
-30.0 -40.0 -56.0 -50.0
-60.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
*Rupee Yearly Average taken/ CAD Year End
Trend:
The current account deficit (CAD) has widened drastically and it accounts for more than 4% of the GDP (the lack of FII inflows and FDI is putting further pressure on CAD).
Triggers:
Inelastic demand for crude and heavy demand for precious metals, pearls and semi precious stones. Slowing exports and increasing imports.
Outlook:
The CAD is likely to improve in the coming months owing to reduced imports in gold and other semi precious stones and pearls. If there is a heightened risk of rising crude prices again due to tensions between the US and Iran escalating in late 2012-13, then we could see further pressure on CAD.
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CAD ($ BILLION)
45.3
48.36
45.85
46.82
10.0
USD/INR
LOCAL INDICATORS FISCAL DEFICIT CONTINUES TO REMAIN HIGH

Fiscal Deficit % of GDP 60 50 44.96 USD/INR
47.18
45.29
44.11
45.3 41.31
-3.1
48.36
43.39
45.85
46.82
-1.0 -2.0 -3.0
40
30
20 10
-3.9
-4.4
-3.5
-3.3
-3.3
-3.5
-5.1
-4.6
-5.1
-4.0 -5.0 -6.0 -7.0
-4.7 -6.9
-7.8
-8.0
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-9.0
* Rupee Yearly Average taken/ FD Year End
Trend:
Fiscal deficit has been consistently holding above 5% due to increased Government expenditure owing to the high subsidies for petroleum and agriculture products.
Triggers:
Higher subsidy bills Policy Paralysis Lower tax collections Failure of the Government to meet its disinvestment targets.
Outlook:
Fiscal deficit will continue to remain high due to populist policies of the Government prior to the General Elections, 2014. We could see some respite due to some key public sector undertakings (PSUs) opting for healthy disinvestment.
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Fiscal Deficit % of GDP
48.59
46.54
52.52
0.0
USD/ INR
LOCAL INDICATORS IIP HIT BY HIGH INTEREST RATES

IIP
60
50 40 30 20
USD/INR
13.7 13.5 41.31 43.39 9.5 52.52 48.36
16
14 12 10
44.96
47.18
48.59
46.54 45.29 44.11
45.3
45.85
46.82
USD INR
8.9 6.2 3.5 7.4
8.1 5.7
2.5
6 4 2
3
-1.8 -1.6
10 0
0
-2 -4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Jun-12
*Rupee Yearly Average taken/ IIP figure Year End
Trend:
Industrial production, which accounts for 27% of GDP, has contracted sharply since 2009.Sluggishness in the industrial index of production is clearly visible due to high interest rates.
Triggers:
High interest rates Slowing investment activity due to loss of confidence relating to Government policies. Slowdown in global demand
Outlook:
The slowdown in industrial output will persist further if there are no signs of interest rate cuts; if there is no active policy action by the Government on FDI; and if there is no revival of the infrastructure segment.
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IIP (%)
LOCAL INDICATORS WPI ON A RISING TREND

WPI
60 50 40
30 20 10 0
4.38 6.96 4.01 6.68 7.15 9.45 7.74 7.25
USD/INR
52.52
10.00
9.00 8.00 7.00 5.00 4.00 3.00 2.00 1.00 0.00 6.00
44.11
45.3 41.31
48.36
43.39
45.85
46.82
USD/INR
2005
2006
2007
2008
2009
2010
2011
Jun-12
*Rupee Yearly Average taken/ WPI figure Year End
Trend:
There is an increasing trend in WPI despite a series of interest rate cuts by the RBI. This is due to supply side factors contributing to food inflation, low interest rates and repeated liquidity injections from industrial nations.
Triggers:
Rising food inflation due to supply side factors Repeated liquidity injections from industrial nations High prices of imported goods like iron & steel, chemicals & precious stones.
Outlook:
WPI may not come down drastically unless interest rates are reduced due to poor monsoon / rain deficit & increasing oil prices.
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WPI (%)
LOCAL INDICATORS BALANCE OF PAYMENTS TREND PEGGED TO FII-FDI INFLOWS

BOP
60
USD/INR
100,000
90,848
50
52.52 48.36 45.85 46.82

80,000 60,000 40,000
47.18
48.59
46.54
45.29 44.11 45.3 41.31 43.39
40
USD/ INR
30
17,185 6,174 11,951 25,552 15,568
35,638
13,453
16,044
20,000
20
-10,400 0
-20,000
10
-20,519
0 -40,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: CEIC, IFA Research
*Rupee Yearly Average taken/BOP March End
Trend:
BOPs trend is totally dependent on FIIs and FDI flows into the country.
Triggers: High current account deficit and declining

capital inflows. Reduction of flows from European countries and banks. Declining ROI for FIIs and other investors to a depreciating rupee.
Outlook:
Can improve ahead provided the Government implements policies with an objective to attract foreign capital.
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BOP
30,819
INTERNATIONAL INDICATORS US TREASURY YIELD HAS AN INVERSE RELATION WITH THE INR
USD/INR
60
US TREASURY YIELD 52.52

7.00
6.02
50
44.96 5.00 4.59
44.11
41.31 4.79 4.63
43.39
USD/INR
40 30 20 10 0
5.00
4.00
4.00
4.26
4.28
3.64
3.24
3.20
3.00
2.76 1.88
2.00
1.00
0.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
*Rupee & US Yield Yearly Average taken
Trend:
The 10-year US treasury yield shares an inverse relationship with the rupee. Recently, yields have been falling to their all-time low of 1.38%. (All-time low since 1912)
Triggers: Global risk aversion.

Investors seeking safer and liquid assets. Reduction of other liquid and credible Sovereign bonds. Downgrading of Euro Zone Countries
Outlook:
The 10 year US treasury yields seem to remain below 2% and may be heading towards 1.0%-1.2% on continued nervousness or the occurrence of any Black Swan events.
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US Treasury Yield
47.18
48.59
46.54
45.29
45.3
48.36
45.85
46.82
6.00
INTERNATIONAL INDICATORS A STRONG DOLLAR LEADS TO RUPEE WOES

USD/INR
55
DOLLAR INDEX
52.52
130
50
47.18 44.96
48.59
46.54 45.29 44.11 45.3 43.39 41.31
48.36
45
115.18
111.28
109.43
40
95.92
90
87.57
87.08
86.38 80.77 77.05 80.8 81.33
76.68
84
70
35
50
30
30
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Jun-12
*Rupee & DI Yearly Average taken
Trend:
The Indian rupee shares an inverse relationship with the Dollar index. The strength in the Dollar index has added to rupee woes recently.
Triggers:
Global slowdown and the rush for dollar assets. Economic woes in Europe and EMs. A healing US economy. Low chances of QE on account of its diminishing returns and upcoming US elections.
Outlook:
The Dollar Index appears to be bottoming out near 72.69 levels and is poised for a possible up-move in 20122013.
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DOLLAR INDEX
USD/INR
45.85
46.82
110
INTERNATIONAL INDICATORS CENTRAL BANKS RESORT TO QE TO AVERT A FINANCIAL CRISIS

35.00% 30.00%
32%
31% 22% 19.00%
25.00% 20.00%
2007 % of GDP
15.00%
2011 % of GDP
22%
17% 7%
10.00% 5.00% 0.00%
6.00%
Federal Reserve
Source: IMF, IFA Research
European Central Bank
Bank of England
Bank of Japan
Trend:
There has been a continuous increase in QE over various economies creating an easy flow of money and inflation across various emerging markets and asset classes.
Triggers:
Slowdown of growth in US, Europe and UK. Increased liquidity crisis in financial markets Continuous buying of bonds to keep interest rates low.
Outlook:
We expect further QE from the ECB, BoE and possibly from the FED but its importance is decreasing every day since a larger share of money is kept as bank reserves and bond yields have already hit all-time lows.
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INTERNATIONAL INDICATORS INR CLOCKS HIGHEST % CHANGE AMONGST KEY ASIAN CURRENCIES
10 5
% Change in Asian Currencies

1.13
0.47 -3.51
0
-5
-3.93
-7.71
-0.85
-10 -10.43
-15 -20
-6.08
-5.74
-25
-20.82 Rupee Indonesia Rupiah Korean Won Malaysian Thai Baht Ringgit Taiwan Dollar Singapore Hong Kong Japanese Dollar Dollar Yen Chinese Yuan
*% change from 1st August 2011- 31st July 2012
Trend:
The Indian rupee has registered the highest percentage change among all major Asian currencies. It has depreciated by almost 24% in the last one year.
Triggers:
Poor local fundamentals Lack of flows due to risk aversion High inflation rate among Asian nations.
Outlook:
We expect the Rupee to be weaker in relative terms v/s all other Asian currencies. We are also seeing an active divergence of FII and FDI funds to other Asian economies due to poor macroeconomic fundamentals and a delay in policy reforms.
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INTERNATIONAL INDICATORS EMERGING MARKETS GROWTH APPEARS TO FALTER

CHINA
20
INDONESIA
KOREA
RUSSIA
TURKEY
BRAZIL
INDIA
MEXICO
15
10
GDP (%)
-5
-10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012 (E)
Source: Trading Economics CEIC, IFA Research
Trend:
The Emerging Nations growth seems to falter again, collectively forming a doubledip kind of a pattern.
Triggers:
Dip in demand from developed markets such as the US, Europe & UK. Pulling back of cheap liquidity from European nations. Dip in overall commodity prices reducing their export earnings.
Outlook:
The trend seems to continue into 2012-2013 on account of an overall slowdown in developing nations growth the main losers being Russia, Mexico, Turkey & Brazil.
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RISK AVERSION GOLD & THE DOLLAR INDEX SHARE AN INVERSE RELATIONSHIP
DOLLAR INDEX
140
GOLD
2500
120
115.18 111.28 109.43 95.92 87.57 87.08 86.38
DOLLAR INDEX
1920 80.77 77.05

80.8
2000
100
80 60 40
81.33
1567
1597
84 74.68
1000
1421 76.68
1097 838
889
20
274
279
348
416 2003
438
519 2005
638
500 0
2000
2001
2002
2004
2006
2007
2008
2009
2010
2011 Sep-11 Jun-12

* DI Yearly Average, Gold Year End
Trend:
The Dollar index has maintained a downward trend since year 2000, making a bottom in May 2011 at 72.69 while Gold has been consistently rising in the same period topping at US$1,920. Since then both the trends have reversed respectively.
Implications:
It shows that investors preferences are shifting from Gold to the US Dollar due to the overbought nature of the precious metal.
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GOLD
1500
RISK AVERSION USD/CHF & USD/JPY INVESTORS SEEK SAFER ASSETS

USDCHF
1.4
USDJPY
130.00
1.2461
1.2528
1.1998 1.0826 1.0853 1.0362 0.8962

120.00
110.00
1.2
USD/CHF
110.16
116.32
117.76
0.8
0.6
103.35 93.58 87.72 79.68

78.46
100.00
90.00
0.4
0.2
80.00
70.00
60.00
2005
2006
2007
2008
2009
2010
2011
Jul-12
*CHF & JPY Yearly Average taken
Trend:
Trend of both the pairs have been consistently falling due to increased investments in this currency pair based on its safe haven status.
Triggers:
Global risk aversion. Investors seeking safer and liquid assets. Reduction of other liquid and credible instruments.
Outlook:
The trend is likely to be range-bound with possible upside in the pair due to increasing debt problems in Japan and banking issues in Switzerland. Both the countries Central banks are aggressively intervening (cap of 1.20 for EUR/CHF and 76 for USD/JPY) to protect their respective exports.
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USD/JPY
0.977
RISK AVERSION TREASURY YIELD OF VARIOUS ECONOMIES BEARISH
Source: CEIC, IFA Research
Trend:
The trend has been consistently falling since 2007, making new lows in 2012 due to increased investor preferences in the above Sovereign bonds.
Triggers:
Global risk aversion. Investors seeking safer and liquid assets. Reduction of other liquid and credible Sovereign bonds.
Outlook:
The trend of the above bond yields remains bearish due to investors seeking a return of their investments rather than returns on their investments.
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RISK AVERSION USD/INR & SENSEX TO CONTINUE THEIR INVERSE RELATIONSHIP

USDINR
60
Sensex 44.7 53.06

20,509 17,465 13,787
55.64
25000
50
42.49 43.51
46.59
48.2
47.94
45.45
20,287
48.58
46.4
43.32
45.02 44.25
20000
40
USD/INR
Risk Appetite
39.38
17,236
15,455
15000
30
20
9,398 5006 3659 3,262 3,972 1999 2000 2001 3,377 5,839 6,603
9,647
10000
10
5000
3055
1997 1998
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Jul-12
*Sensex & Rupee Year End Rate
Trend:
The trend of the Rupee since 1997 has been consistently weak. Only during the period 2003-2008, we have seen an appreciating trend due to continuous inflows across all Emerging Markets.
Triggers: Low interest rates post 2005 in the US.

Increased risk appetite Active carry trade from Japan and US.
Outlook:
Since we have seen increased risk aversion across the globe and slowdown of growth in Emerging Markets, we would continue to see a depreciating trend for the rupee ahead.
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SENSEX
39.21
RBIS STANCE PURCHASE & SALE OF DOLLARS A DOWNWARD TREND SEEN

PURCHASE
74.88
57.31 48.93 45.90
SALE
80.00
70.00 60.00
36.41
29.37 22.52 15.39 16.53 15.48 7.10 20.59 12.31 6.49 12.52 2.45 2009 2010 11.53
40.00 30.00 20.00
0.00
2002 2003 2004 2005 2006
0.00
2007 2008
0.76 0.00
2011
3.09
Jun-12
10.00
0.00
Source: RBI, IFA Research
Trend:
Consistent downward trend seen in RBIs intervention during the last few years.
Triggers:
The Central Bank wants the market forces to determine the true value of the exchange rate The main objective is to curb market volatility rather than to control the exchange rate.
Outlook:
The RBI would not like to sell dollars due to the countrys unhealthy reserves position and aggressive buying will also not take place due to lack of robust inflows and the high cost of infusing liquidity.
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$Billiom
50.00
RBIS STANCE FX RESERVES & IMPORT COVER CONSISTENTLY DECLINING

18 16
16.9 14 11.5 8.8
FOREX RESERVE ($ Bn)
IMPORT COVER
350
14.3
11.6 12.5
14.4 11.1
9.8 9.6 305
300 250 200
IMPORT COVER
14 12 10 8 6 4 2 0
310
252
279
7.2 294
150 100 50 0
199
42 2001 54 2002
75
2003
113
142
152
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: RBI, IFA Research
*Rupee Yearly Average taken
Trend:
We have seen a consistent decline in the reserves to import cover ratio from 20102012, indicating pressure on the current account deficit (CAD).
Triggers:
Increased imports Inconsistent FII and FDI flows Revaluation of FX reserves due to the dollar.
Outlook:
We do not expect to see any significant improvement in the import cover ratio until we see significant FII inflows in the coming days.
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FOREX RESERVES
BLACK SWAN EVENTS

We expect the possibility of some Black Swan events emerging in FY2013, which could strongly boost the US Dollar in that year.
US dollar index to head towards 90 in FY2013: The USD already seems to have bottomed in 2011 near 73 levels. High risk aversion and positive economic numbers compared with its peer countries may push the US economy to stronger levels. The Dollar index above 85 levels could push the rupee close to 57-58 levels. US-Iran war: US-Iran relations are strained over a variety of issues including Iran's backing of terrorist groups and its nuclear activities. Any kind of warlike speculation may push oil prices above USD120/barrel, which may hit all economies especially oil importing economies such as India, drastically. The Arab spring is already prevalent in Tunisia, Egypt and Libya which is making security situations unstable with the US and Iran areas. We have recently seen Chinas growth falling to a 3-year low: Chinas surging real estate sector, buoyed by a flood of speculative capital is preparing itself for a larger-than-expected investment bust. There are indications of credit excesses, which may lead to a bubble kind of situation likely occurring in 2013. We have already seen some of the biggest real estate companies posting lower growth in 2012. Any such major public announcements may lead to a liquidity crisis, which may spread across Emerging Markets like India too. India rating downgrade: The global rating agencies have already downgraded outlook for the Indian economy. We feel that there could be a possibility of an actual downgrade due to poor monsoons, increasing CAD and delays in implementing Government policy measures to reduce fiscal deficit. If such an event occurs, the cost of international dollar funding will go up for Indian banks and companies, which will lead to a liquidity crisis and increased NPAs for banks. Companies will have to necessary buy US dollars from the market to pay back their dollar liabilities which will create huge demand for the US dollar, making the rupee weaker. The arab spring is already prevalent in Tunisia , Egypt and Libya which are making security situations unstable.
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DISCLAIMER & DISTRIBUTION:

Disclaimer: While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and India Forex Advisors Pvt. Limited and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions. This document is a piece of economic research and is not intended to constitute investment advice, or to solicit dealing in FX or investments. Distribution: This service / information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose unless otherwise expressly authorized. This service / information is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IFA and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions.
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INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS Rupee may hit 60 by June 2013

Rupee may hit 60 by June 2013

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

Anita Joshi anita.joshi@indiaforex.in

Manpreet Kaur Doad manpreet@indiaforex.in

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Major International Triggers:

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013 Chart

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

LOCAL INDICATORS SLOWING GDP GROWTH

9.7 6.7 4.5 1.6

8.3 6.1 6.5

2011 2012 (Est)

Source: Trading Economics, IFA Research

*Rupee Yearly Average taken / GDP Year End Rate

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

LOCAL INDICATORS WIDENING CURRENT ACCOUNT DEFICIT

8.8 0.8 -10.3 -9.5

-30.0 -40.0 -56.0 -50.0

Source: Trading Economics, IFA Research

*Rupee Yearly Average taken/ CAD Year End

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

LOCAL INDICATORS FISCAL DEFICIT CONTINUES TO REMAIN HIGH

-1.0 -2.0 -3.0

-4.0 -5.0 -6.0 -7.0

Source: Trading Economics, IFA Research

* Rupee Yearly Average taken/ FD Year End

Fiscal Deficit % of GDP

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

LOCAL INDICATORS IIP HIT BY HIGH INTEREST RATES

46.54 45.29 44.11

8.9 6.2 3.5 7.4

Source: Trading Economics, IFA Research

*Rupee Yearly Average taken/ IIP figure Year End

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

LOCAL INDICATORS WPI ON A RISING TREND

Source: Trading Economics, IFA Research

*Rupee Yearly Average taken/ WPI figure Year End

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

LOCAL INDICATORS BALANCE OF PAYMENTS TREND PEGGED TO FII-FDI INFLOWS

52.52 48.36 45.85 46.82

45.29 44.11 45.3 41.31 43.39

17,185 6,174 11,951 25,552 15,568

Source: CEIC, IFA Research

*Rupee Yearly Average taken/BOP March End

Triggers: High current account deficit and declining

INDIA FOREX ADVISORS RESEARCH | CURRENCY INDIAN MACRO ECONOMICS

Rupee may hit 60 by June 2013

US TREASURY YIELD 52.52

44.96 5.00 4.59

41.31 4.79 4.63

Source: Trading Economics, IFA Research