INR has moved from 70.70 to 72.00. Will it move to 75?

INR has moved sharply from 70.70 up to 72.20 and currently trading at 72.17. This was expected as explained repeatedly in our analysis in recent times. Question is whether it will move towards 75.0 + kind of levels or stabilise around current levels or max after touching 73.00.

Without a global chaos, INR is unlikely to move to 75.00 + in an environment where central banks have benign stance and India offers a lucrative foreign capital friendly environment.

So what’s the chance of Global chaos.

If a trade deal is not signed between China and USA that will be hugely negative from sentiment point of view and vice a versa. Negativity around trade rift can trigger global sell off. However two important points 1) Chances of Trump derailing markets completely is not in his interest at all as elections are coming up and he should not be blamed for the sell off. So most likely after all the noise he will sign up something. 2) Fed is purchasing assets already in the name of repo market stabilisation along with cutting interest rates. All central banks across the world has supported with monetary policy easing. Hence even if a trade deal is not boosting sentiments , The liquidity will make market overlook the risks and instead play the game of risk-on for some more time. And that means inflow into emerging markets including India. I will not be surprised if GOI announces USD bond issue some time to avoid crowding out effect in local market and to sort out fiscal needs. In any case foreign capital friendly policies to continue.

So while I am an eventual bear as “print to prosperity” cannot work forever, but for the time being base case is that stabilisation in INR can be expected instead of continued sell off.

This is generic view and when we combine this with the right strategy, chances of you having cost savings, profit , positive return from the market / hedging improves. In any case having a view doesn’t mean that possibility of any event should be ruled out and overlooked. Lets discuss