Oversold rupee likely to rise as oil peaks, says SBI executive

Currency’s slide this year also likely to be selfcorrecting as weakness to boost exports

India’s rupee may be set to recover as oil peaks out and investors realise the currency has been sold off too heavily amid the emerging-market rout, according to Shantanu Shukla, a vice president for global markets at India’s biggest bank.

The currency’s slide this year is also likely to be self-correcting to some extent as its weakness will help boost exports, said Shukla, who works for SBI in Singapore. While part of the rupee’s weakness has stemmed from the US-China trade war, he said this may actually benefit India’s economy as businesses look to source products from alternative markets.

“In the short term, the rupee is The rupee’s recent plunge is evoking memories of slide of around 20 per cent from February to August 2013 during the so-called taper tantrum. India’s fundamentals have improved since then and it has a bigger war chest of foreign-exchange reserves, Shukla said.

“Smart institutional money will come back,” he said. “At some point, this whole fall will be stemmed and we will see money coming back.” suffering from the market sentiment,” Shukla said in an interview last week. “Right now it’s contagion. Everything is being painted with the same brush. I don’t think beyond 70 is a number that the Indian rupee should trade at.”

The rupee is this year’s worstperforming Asian currency, dropping 11 per cent to set a succession of record lows. It reached an all-time low of 72.9750 per dollar last week before jumping 0.2 per cent yesterday to 72.2288. The currency may eventually strengthen back to 68, Shukla said, without giving a time frame.

India’s government has been seeking to stem the sell-off, last week announcing a number of measures to stem the rupee’s slide.

These included relaxing overseas borrowing restrictions on local manufacturers, reviewing whether to ease a cap of foreign ownership of corporate bonds, and considering limiting “nonessential imports.”

These efforts have so far failed to halt the currency’s decline as buoyant fuel costs have pushed up India’s import bill and worsened its current-account deficit.

Relief may be in sight on the oil front, Shukla said.