India’s Rupee May Advance to 47 in Six Months, Barclays Says

By Anoop Agrawal

April 17 (Bloomberg) -- India’s rupee may strengthen almost 6 percent to reach 47 a dollar in six months on better prospects for global growth and an increase in foreign investment, according to Barclays Plc.

Asia’s third-biggest economy may see a recovery in the three months ending Dec. 31, after the growth rate reaches a “bottom” in the prior quarter, helping the nation post a balance of payments surplus in the second half of the year, Sailesh Jha, an economist at the world’s third-largest currency trader, wrote in a research report dated yesterday. He had forecast last month that the rupee would drop to a record-low 56 by end-June.

“In our view, the government believes that the worst of the slowdown in growth is over,” Singapore-based Jha wrote. “The risks to our growth forecast are tilted to the upside versus our previous assessment of risks to the downside.”

The rupee traded at 49.77 per dollar as of 10:34 a.m. in Mumbai, according to data compiled by Bloomberg. It has rallied 5 percent since touching a record low of 52.185 on March 3.

The median estimate of 25 strategists surveyed by Bloomberg News is for the rupee to weaken to 50 by end-September and to reach 48.98 by the end of the year.

Barclays maintained its growth forecast for India at 4 percent in the fiscal year that started April 1. The economy expanded 5.3 percent in the three months through Dec. 31, the slowest pace in six years. Growth in the year that ended March 31 may have dipped below the government’s target of 7 percent, Prime Minister Manmohan Singh said March 13.

End of Cycle

The Reserve Bank of India will keep interest rates unchanged on April 21, Jha predicted, adding that the cycle of reductions may be approaching an end. Governor Duvvuri Subbarao has slashed the benchmark overnight lending rate, or repurchase rate, five times since mid-October to 5 percent, the lowest level since it was introduced in 2000.

The central bank will also leave the proportion of cash lenders must set aside to cover deposits unchanged, Jha said.

Indian equity purchases by foreign funds exceeded sales by $766 million this month through April 15, five times their net purchases in all of March, according to data from the stock market regulator.

The deficit in India’s balance of payments widened to a record $17.9 billion in the three months to Dec. 31, compared with a shortfall of $4.7 billion the previous quarter.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.