The Indian Rupee has stubbornly remained range bound in between 44-47.50 for almost two years before breaking out with sharp depreciation of almost 5% in the last two weeks.
This is largely in line with other emerging market currencies like Brazilian Real and Russian Rouble which fell more than 5% over the same period.
The fall was prompted with 6% rise in the dollar Index and decline in commodity prices on negative news flow from US and European countries.
Worsening sovereign crisis in Europe and deteriorating outlook for Emerging economies, led by global economies is partly responsible for the rupee depreciation.
"The magnitude of depreciation in any currency is impacted by a combination of USD rebound, country-specific domestic factors (e.g. politics), balance of payments (BoP) drivers and investor positioning," according to report by CLSA.
The rupee has depreciated around 9% this calendar year and is the worst performing currency YTD, an outcome that goes together with India's distinction of the worst performing equity market.
India runs a chronic current account (CA) deficit and FII selling added to the pressure on INR to weaken. In line with expectations, INR was a regional under-performer even before the big move from August onwards.
"We maintain our forecast of Rs 46/USD by March 2012, due mainly to the possibility of improving global risk appetite and further liberalisation of the BoP capital account," said the report.
Depreciation of INR against USD will mean that the liabilities of the corporate running unhedged USD debt will go up in INR terms. "We understand that most of the corporates keep the principal unhedged though some forex cover is bought for interest payments," according to report by CLSA.
"Companies that could get hit due to the above are Reliance Communication Ltd, Bharti Airtel Ltd, Tata Power Ltd, Maruti Suzuki Ltd and Jet Airways Ltd. Accounting for the same is unclear but many corporates will route these losses through P&L in 2QFY12 itself," added the report.
This is largely in line with other emerging market currencies like Brazilian Real and Russian Rouble which fell more than 5% over the same period.
The fall was prompted with 6% rise in the dollar Index and decline in commodity prices on negative news flow from US and European countries.
Worsening sovereign crisis in Europe and deteriorating outlook for Emerging economies, led by global economies is partly responsible for the rupee depreciation.
"The magnitude of depreciation in any currency is impacted by a combination of USD rebound, country-specific domestic factors (e.g. politics), balance of payments (BoP) drivers and investor positioning," according to report by CLSA.
The rupee has depreciated around 9% this calendar year and is the worst performing currency YTD, an outcome that goes together with India's distinction of the worst performing equity market.
India runs a chronic current account (CA) deficit and FII selling added to the pressure on INR to weaken. In line with expectations, INR was a regional under-performer even before the big move from August onwards.
"We maintain our forecast of Rs 46/USD by March 2012, due mainly to the possibility of improving global risk appetite and further liberalisation of the BoP capital account," said the report.
Depreciation of INR against USD will mean that the liabilities of the corporate running unhedged USD debt will go up in INR terms. "We understand that most of the corporates keep the principal unhedged though some forex cover is bought for interest payments," according to report by CLSA.
"Companies that could get hit due to the above are Reliance Communication Ltd, Bharti Airtel Ltd, Tata Power Ltd, Maruti Suzuki Ltd and Jet Airways Ltd. Accounting for the same is unclear but many corporates will route these losses through P&L in 2QFY12 itself," added the report.
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