Indian Rupee will perform in 2016?

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gsr-gold-rupee-524-neal-bhaiGold Silver Reports – There are fears of fund outflows after the Fed rate hike, but broking firm Religare believe that the capital outflows from India due to the U.S rate hike may not be as severe as widely projected. As the rate differential between the 10 year G Sec between India and the U.S is at a high figure of 550 basis points, FIIs may not withdraw funds as feared.

The government rather expects FDI inflows to rise by 40-45 per cent in the year 2016 and will take further steps to attract foreign capital flows into India. The FDI inflows during Jan – Sept period were up by 18 per cent to USD 26.51 billion, whereas in the entire 2014, FDI inflows were USD 28.78 billion.

There are positives on the domestic economic front as the Industrial Production (IIP) increased by 4.8 per cent during the April-October quarter, 2015-16 as compared to the growth of 2.2 per cent during the same period of previous year 2014-15. The growth in IIP number is a sign that the momentum is returning to the economy.

Along with this, the RBI has built up a strong wall of forex reserves over the last couple of months that will help in avoiding any sharp currency shocks. Overall, there are expectations that Indian rupee is likely to outperform its Asian peers on the back of strong growth, low CAD and fiscal deficit under control and expectations of strong inflows.The Indian rupee would prove its resilience, on the back of strong domestic fundamentals, with GDP expected to grow at 7.5-7.6% in 2016. – Neal Bhai Reports