Deutsche Bank says adjustment to rupee not yet over, currency likely to touch 75/$

Sameer Goel, head of Asia macro strategy at Deutsche Bank, spoke to CNBC-TV18 about the trends in domestic equity market and his outlook on rupee.

“It has been our view for a little while that a lot of the headwinds for emerging markets are still very much on and that will continue to pose pressure and at least keep markets terribly volatile. A lot of macro events happening at the moment, we see what is happening on the oil front, we certainly are seeing the trade narrative at the very minimum being very volatile but arguably only worsening here and we are seeing greater macro noise coming out of Europe,” said Goel.

Talking about the Indian trade dynamics , Goel said, “Some of the recent news at least on the margin has been positive. In that the trade gap and the basic balances more generally has been the basis for a lot of the weakness in the currency, a lot of the bearishness on the currency but there the global dynamics will still remain fairly punitive, the Indian trade dynamics are subject not just to oil prices but also in some sense to the broader trade. I think it is very hard for this narrative to turn sharply without corresponding tailwinds from the global picture as well."

“To our mind, the adjustments in the rupee to the underlying situation on basic balances and of course to the challenges about global monetary conditions and as the Fed continues to hike which in our opinion, it will for the next four-five quarters. It still presents a challenging situation. The adjustment in the rupee is not yet complete,” said Goel.

According to Goel, in the near-term, there could be some better support for the rupee. "But to our mind the adjustment will probably – and we have held our target for a while – take us closer to 75 on dollar/rupee in our opinion,” he said.