New Delhi: Ratings and research firm Crisil Wednesday said there are two-third chances that the rupee can touch the level of 64 against the US dollar by March-end 2016, while there is one-third chance it may reach 67 per dollar.
"Crisil Research, in the base case scenario, expects the rupee to appreciate from the current levels of 66.1 as of August 25 to settle at around 64 by March 31, 2016," it said in a statement.
"We assign a two-in-three chance to this event. On the domestic front, the key underlying assumption is that the gradual improvement in India's macroeconomic indicators (a low CAD, falling inflation, lower fiscal deficit) will continue," it added.
It said decline in commodity prices continues to benefit imports despite the depreciation of the rupee.
"Rate hike by the US Federal Reserve to be next big temblor rupee has posted significant losses in the last few weeks bringing back memories of 2013, when it had depreciated 24 percent to 68/USD in a matter of four months," it said.
The rupee has dropped by as much as 3.7 percent in only a few days since the yuan devaluation on August 11.
"However, the current scenario is different than what we saw in 2013. While our external vulnerability has declined, the frequency of global shocks has increased," Crisil said.
In its report tiled Crisil Insight, it said this is not 2013. Back then, India's external vulnerability was high (high current account deficit, or CAD) and weak macroeconomic parameters (rising inflation, high fiscal deficit and low growth).
It said India's macros have improved considerably since then ? CAD is in safe zone, inflation is low, fiscal situation is better and growth is grinding up.
India's external vulnerability has not only declined over time, but also vis-?-vis peers, which is forecast at 1.5 percent of GDP for fiscal 2016, it said.
Crisil said India's CAD is one of the lowest among major emerging countries, helped by lower commodity prices, especially oil.
On other macroeconomic indicators, compared with 2012, the growth inflation mix in India has turned for the positive ? with inflation climbing down and growth picking up.
The 2013 depreciation was a case of high vulnerability but a single shock and since then, while India's macroeconomic fundamentals have improved and external vulnerability reduced, the shocks have become more frequent.
Crisil said the current depreciation is a case of reduced vulnerability but frequent shocks.
"Overall, the frequency of shocks have increased in recent months and though India is better placed than other emerging economies, the rupee has also started losing ground.
"Net inflows from foreign institutional investors between April and July were a paltry USD 0.8 billion compared with USD 17 billion in the same period last year," it added.
