See rupee down to 67/$; equities sell-off due to oil price upturn: CLSA

NEW DELHI: One of the most underappreciated aspects of the recent sell-off in Indian equities is the upturn in oil prices, Rajeev Malik, Senior Economist, CLSA said.

"So, for example, the peak of Bank Nifty and the bottom of crude oil prices actually synchronised quite well," he illustrated.
Besides, the global bond market rout has another important reason that took the Indian equities lower in the recent past, he said. Add to that, the unnerving MAT levy raised nervousness among investors, a policy initiative that actually caused self-injury and was totally avoidable by the government, he said.

Malik believes that the the impending, and globally feared, interest rate hike by the US Federal Reserve willnot take place before September, and the only one this year

The rupee will move lower to weaker, towards 67 per dollar in a year's time. What is ignored, he said, was the glaring fact that India's inflation is the second highest in whole of Asia, simply because the broader global disinflationary impact of for commodity price correction was favourable to inflation in other countries as well.
"So, India’s inflation differential continues to argue why the rupee should actually depreciate. It is just that the magnitude of portfolio flows for example has pushed the currency away from where perhaps it should be," he said.