The Reserve Bank of India’s (RBI) interventions can curb excessive volatility and discourage speculative pressure but a sustained appreciation of the rupee would require an improvement in underlying fundamentals, including moderating oil prices, stronger capital flows and greater global risk appetite, said Prachi Deuskar, co-founder of Lotusdew Wealth and Investment Advisors in an interview with Moneycontrol.
Deuskar noted that monetary tightening can support the rupee but cannot, on its own, reverse its decline if the underlying causes are widening external imbalances or sustained capital outflows.
Meanwhile, amid elevated energy prices, monetary tightening and global uncertainty, GDP growth exceeding 7.1 percent is plausible but not highly probable, the smallcase manager said.
Do you think a sustained recovery in equity markets is unlikely until oil prices begin to cool?
Cooling oil prices would certainly help, but they are not the only driver of a potential market recovery. A sustained rise in Brent crude increases the import bill, puts pressure on the rupee, and raises inflation risks. That can hurt corporate margins and constrain monetary policy.