Not comfortable about going soft on rupee: Bhaskar Panda, HDFC Bank

In a chat with ET Now, Bhaskar Panda, HDFC Bank, says he does not think this trend of rupee appreciation is going to continue for long. Edited excerpts

ET Now: Before we talk about specifics of Indian macro, I would like to draw your attention to a lot of central bank communication which is expected and anticipated in the next 8-10 days. We start with ECB this week. We have got BOJ followed by Fed and then the RBI credit policy. So given that lot of central bank communication is expected in next 8-10 days, what should one expect?

Bhaskar Panda: I think the most important this week is ECB decision. As far as I know I think the positioning this time has not been as…

ET Now: You were expressing your thoughts on the central bank policy action and the importance of ECB.

Bhaskar Panda: So what I was saying is that this week the policy of ECB is of utmost importance. Last when the ECB policy was announced, the positioning was against the euro. What we see today is that there is not much positioning against euro and that means the expectation from ECB is not as large as it was last time. Therefore, probably the announcement post ECB decision will not be as large as it was last time. I am expecting 10 to 12 bps negative rate coming from ECB and also expansion of their programme from the current level to buy another five to ten billion euros per month. So that is my expectation from ECB at this point of time.

ET Now: But how does that tie in with what happens later on especially with the Fed policy? How are you positioning your portfolio in lieu of that?

Bhaskar Panda: If you look at the euro movement, it has been a little more stable vis-à-vis the last movement. Euro positioning has seen much more equilibrium if you look at the positioning, people are really clueless. Personally, I feel if any rally happens, then euro is going to be on sale rather than buy on the dips depending on whatever ECB does going forward. So whether it will be 10 bps below take down the savings rate another 10 bps or 12 bps or another 15 bps is obviously a matter of speculation but I expect, it is going to be negative 10 to 12 bps saving rate cut further.

ET Now: Are you amazed the currency’s strength at this point? It is nudging 67 and the expectation really is that there perhaps might be more strength in the currency whereas around the region there is of course more weakness coming in?

Bhaskar Panda: Actually very interesting, I mean, I also agree with you. I was expecting dollar-rupee to go towards 67.11 where there was resistance and I have seen intraday it has moved below 67.11. It is difficult to say that it will push beyond probably 66.80 which is another 20-30 paisa from here. I really do not know why rupee should be behaving completely out of sync with other block currencies. Therefore I really would not be comfortable going soft on dollar-rupee. I will rather wait and see it breaks 67 and goes towards 66.8. I will rather be long than going soft here. I do not think this trend of rupee appreciation is going to continue for long. Earlier also I had given a call that we should be closing somewhere between maybe 66.80 to 67 this month end. So I really am a little surprised at the move today.

ET Now: Do you think if Reserve Bank of India does not announce a rate cut in the coming credit policy in April, that will lead to a big spike in yields?

Bhaskar Panda: Could be. Could be because expectation is building up for a 25 bps rate cut among the circles. So there would be a reaction to that, yes.