The beleaguered Indian rupee fell sharply once again on Wednesday despite central bank intervention, prompting fears of a long-drawn out decline even as analysts say the rupee has started looking ripe for investment at these levels.
At 4.20pm UAE time (12.20pm GMT), the rupee fell to Rs14.67 against the UAE dirham, matching the lifetime low it made last week on May 4, affording Indian expats the ability to remit home more rupees with the same amount of dirhams.
Foreign investors have been dumping Indian stocks and other investments on fears of a fundamental weakness in the country’s finances and concerns about Euro Zone troubles making it difficult for the emerging Indian economy to continue growing at an even clip.
According to analysts, foreign investors have sold nearly Rs10 billion (Dh685mn) of local equities in the past two sessions, as political uncertainty in Greece combines with continued ambiguity about foreign investment taxation in India.
The Reserve Bank of India (RBI) reportedly pumped in dollars into the country’s foreign exchange market yesterday in a bid to stem the decline, but the move has clearly not worked as after a slight reversal seen yesterday, the rupee slid again today, and is at its lifetime low now.
Some analysts have now come around to saying that the rupee has begun looking alluring for long-term investment.
The rupee is trading at “attractive fundamental levels,” Credit Agricole said in a note, contrarian to views from Swiss bank UBS, which says the rupee is slated to decline to fresh lifetime lows in the near future.
On the other hand, the Credit Agricole report maintains that the rupee has seen significant Real Effective Exchange Rate (REER) depreciation over the past eight months, which should allow the country’s current account position to stabilise in coming quarters.
These factors make the currency fundamentally attractive and recent positive policy moves suggest that the timing to buy the INR looks right,” the bank said.
While UBS maintains that the rupee is trending towards Rs56 against the US dollar (Rs15.25 against the dirham), Credit Agricole says the currency could recover to Rs50 against $1 (Rs13.61 against Dh1).