Rajeev Malik Senior economist, CLSA

The rupee has depreciated despite the soft ening in the dollar index. This price action is a shift from its signifi cant outperformance relative to other emerging market currencies. Recent disappointing onshore news fl ows have also soured foreign investors’ assessment. However, global factors — including higher crude oil prices, portfolio allocation shift away from Indian equities and the painful global bond market correction — have also played a role. The rupee is expected to weaken to 67 in a year. Shift s in global risk appetite and expectations about US monetary policy will add to volatility. India is economically resilient to global fl ip-fl ops but it can’t be unaff ected by adverse global events. The rupee is over 10-13% overvalued on a REER basis. The current rupee overvaluation remains inimical to the government’s agenda of boosting growth and employment. A depreciating rupee is part of the solution, not part of the problem.

Gautam Trivedi CEO, Religare Capital Markets

The rupee has depreciated due to four reasons. Firstly, the capital outfl ows triggered by the uncertainty over MAT. Media houses are also partly to be blamed for this, as misrepresentation of the MAT liability fi gure has sent FIIs scurrying. Secondly, FIIs have been more attracted to the Chinese, Taiwanese and Korean markets since March, when the Sensex touched the 30,000 mark for the fi rst time. Another reason is the perception that there is a slowdown in reforms. Lastly, with India Inc putting up a disappointing earnings show, the rupee has had no scope for respite. We don’t expect to see a signifi cant depreciation unless China’s weight is doubled in the MSCI Index. Today, China’s combined market capitalisation is almost $8 trillion, 4X that of India. We believe the rupee is likely to stabilise unless this event takes place; if it happens, there could be signifi cant capital outfl ows, which could have a negative impact on the currency.