Date: April 6, 1999    Spot Rate: 42.70    Time 18:00 (IST)

Forecast
Over a 1-month time frame the market ought to trade in a range of 42.50 to 43.00. Over a 3-month time, the maximum we would expect is 43.50.

Some Perspective
The Rupee has not been "devalued" today. It weakened today on account of inter-bank trading in reaction to a flash on a newswire service that Jayalalitha would oppose a Trust Motion is Parliament. The story later proved to be unfounded. So much for the "Amma" factor. Compared with the major international currencies like the Yen, Euro and Pound, which fluctuate to the extent of almost 1% everyday, the Rupee is not volatile at all. Today’s movement has been just 0.77%, after almost eight months of stability (since mid- August last year) around 42.50.

Exports Humbug
"The Finance Secretary, Vijay Kelkar, has hinted at Rupee depreciation to spur exports", reports Business Standard. This is a recurring phenomenon - politicians and bureaucrats, exporters and chambers of commerce - calling for a weaker Rupee to kickstart Exports. We have to wake up to the fact, that the Rupee is not the magic cure for our dismal export performance. Even after the sharp fall in the Rupee from near 39.25 in March ’98 to 42.50 by June (a fall of 8.28%), exports have not grown in 1998-99. We have to admit that there are other factors governing exports also, such as the state of the world markets and world trade, the quality of Indian goods, delivery schedules etc. The much deeper rooted problems are holding back Indian exports. Calling for a weaker Rupee is just a "quick fix".

The Sensex is a better indicator
As you are aware, the BSE Sensex is a better indicator of the Rupee’s health than imports or exports and we have long been bullish on the Sensex. With companies like Infosys listing on the NASDAQ and Satyam planning an ADR issue and FIIs keen on the market, there is no threat to the Rupee. Consider this: the Asian crisis has cooled off, there is some hope of an economic revival on the horizon, inflation is below 5%, India’s forex reserves are in excess of $ 31 billion. There is no reason for FIIs to pull money out of India.

The only black spot on the sun is Amma’s shenanigans. But both the equity market and the forex markets have learnt to live with that. What happens if the BJP government falls? A Congress-led coalition comes to power. Who is going to be the Finance Minister then? Dr. Manmohan Singh. Is that a reason to sell the Rupee? We think not.

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