Rupee may hit 50/$ in a few months: Govt

NewDelhi:The government on Friday said it expects the rupee to appreciate to around 50 against the dollar over the next three-four months on higher foreign inflows, a development that will help rein in subsidies and also check inflation. 

    "The rupee has gone below 53 and that reduces the subsidy requirement. If rupee further strengthens, which we hope it will, with the steps the government is taking, we expect it could even touch 50 in the next 2-3months or four months," economic affairs secretary Arvind Mayaram told reporters. He said the recent policy initiatives are expected to result in higher foreign exchange inflows — through the FII and the FDI channels — and ease the pressure on the rupee. 
    On Friday, the rupee rose to 52.50, a level last seen on May 1 before ending the day at 52.86, 16 paise stronger than the previous close. For a currency that was among the worst performers till recently, this was the fourth straight week of gain and the best quarter since June 2009. Since September 13, when the government initiated the so-called reform measures by raising diesel prices and capping subsidized cooking gas sales, the Indian currency has gained around 5% against the greenback. 
    A gaining currency makes imports cheaper, especially the oil import bill, and cools down inflation. Mayaram said that a one rupee gain translated into 8 basis points reduction in inflation (100 basis points make a percentage point). Going by this argument, nearly a quarter percentage point has been shaved off from inflation in the last two weeks, while the oil subsidy, based on underrecoveries of oil companies that was projected at Rs 1.67 lakh crore, has also come down by around Rs 20,000 crore. A one rupee change against the dollar results in change in under-recoveries by Rs 8,000 crore. The market, however, is not as bullish. In a research note, Bank of America Merrill Lynch economist Indranil Sengupta estimated the rupee to be around Rs 51 to a dollar this fiscal. Most agencies expect the rupee to hover around 51-52 to the dollar given the global uncertainty. 
    But even at these levels, there is a gain for the government. "It is not simply in terms of cutting subsidies that you can contain fiscal deficit, (but) by better management of economy also fiscal deficit can be contained," Mayaram said. He said the government may step up the disinvestment drive and will try to keep the fiscal deficit as close the target as possible. Sensex closes near 15-month high 
Mumbai: The government's moves to increase revenues and an assertion that its borrowing from the market for the second half of the current fiscal will not exceed the budgeted figure led to a strong rally on Dalal Street, lifting the sensex by 183 points to 18,763 — near its 15-month closing high mark. 
    The day's rally, that added Rs 73,000 crore to investors' wealth, was also aided by news from Europe that Spain, one of the struggling economies in the continent, has agreed to an austere budget that would contain its fiscal deficit to some extent. 
    The day's session began on a strong note with sensex up more than 100 points, and soon climbed to its intra-day high at 18,870. 
    Profit-taking late in the session, however, pulled the index down from its high and it closed with a 1% gain. 
    The rally was helped by foreign fund buying with data at the end of the session data showing a net inflow of Rs 1,230 crore. 
    The day's figure took the aggregate monthly FII flows to over Rs 20,000 crore, or about $3.9 billion. 
    Domestic funds, however, remained net sellers with a net selling figure of Rs 679 crore, taking the monthly figure to close to Rs 9,200 crore. 
    Among the top sensex gainers were Hindalco, up 3.4% at Rs 121, Tata Motors gained 3% to Rs 267 and Cipla with its stock up 2.5% at Rs 381. 
    Of the 30 sensex stocks, 26 ended with gains. 
    The strong FII flows also aided in strengthening the rupee, which closed at 52.86 to the dollar, compared to its Thursday close of 53.03, a five-month high.