Union budget to chart rupee's next course: Experts

Budget proposals, coupled with the outcome of the G20 finance ministers meet and global cues, are expected to chart the course of the Indian rupee during the upcoming week, experts said on Saturday.

Currency analysts singled out the Union Budget as the single most important factor for the rupee in the upcoming week.

The Union Budget 2016-17 will be tabled in parliament on Monday. This will be the key driver for not only currency markets but equities as well.

"The rupee is expected to maintain a downward trajectory over the short-term. The Union Budget can either arrest the downward trend or accelerate it," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

"The important things that will determine the rupee's next movements will be the quality of numbers that the budget comes out with."

Banerjee cited the fiscal deficit targets and the level of capital expenditure's fund allocation as key themes which will be closely monitored by traders.

"It would be interesting to see -- what kind of fiscal deficit targets are projected and expenditure limits the government sets out in the budget," Banerjee added.

In addition, investors will look out for any positive budgetary announcements and news on expected banking sector reforms.

Market participants are hopeful that the central government may increase expenditure, announce tax concessions and pave the way to reduce the NPAs (non-performing assets) levels of the banking sector.

Other currency analysts predicted that the outcome of the two-day G20 finance ministers' meet which ends in Shanghai, China on Saturday, will have some bearing on the rupee's movements.

"Any positive outcome or uplifting statement will trigger a relief rally in the equity markets which might even spill over to the currency markets," a currency analyst told IANS from New Delhi.

Even the interest of foreign investors in the country's equity and bond markets will set the tone for the Indian rupee.

On a weekly basis, the rupee weakened by 15 paise to 68.62 (February 26) against a US dollar from its previous close of 68.47 (February 18).

The weakness in the rupee's value indicates a massive outflow of foreign funds from the equity and debt markets.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) sold Rs.6,763.11 crore or $986.13 million in the equity and debt markets from February 22-26.

Data with stock exchanges disclosed that the FPIs divested stocks worth Rs.3,841.63 crore during the week under review.

According to Hemal Doshi, chief currency strategist, Geofin Comtrade: "USD/INR spot is facing resistance near 68.80/85 levels. A close above 68.85 will lead to a rally towards 69.20/30."

"Till that time, we can expect spot to move lower towards 68.45 and then 68.30."