The currency markets have gone through a period of high turbulence amid Covid-19 fears. When emerging market currencies have declined 25-40%, Indian rupee has shown significant resilience and depreciated by a mere 6%.
We believe this resilience of the rupee may continue due to improving macros in India as Crude Oil is expected to remain lower for a longer time frame.
FII outflows of near 1,23,000 crore in both equity and debt segment has led to recent rupee depreciation. RBI has taken the bold step of selling dollars of more than $17 billion in a month, not seen in a decade to curb rupee depreciation, therefore the pace of rupee depreciation would remain quite slow.
Rupee would continue to outperform the emerging market currencies. We expect some reversal from the crucial hurdle of 78.5, towards 75.5.