Sustained Rupee Depreciation May End Soon: Dhiraj Relli

During an interaction with Moneycontrol, Mr. Dhiraj Relli, MD & CEO, HDFC Securities, said that the era of sustained rupee depreciation may end soon.

RBI’s Approach and Near-Term Rupee Outlook 

Mr. Relli stated that “It seems the RBI is more comfortable with wider volatility and is not intervening, allowing the rupee to settle at a fair value”. He said that to that extent, in the short term, there could be some more dip in the rupee and that it could touch 90. He noted that it was almost there, around 89.85, which was almost the low seen earlier in the day. He added that to that extent, 90 is not very far. 

Long-Term View on Rupee Depreciation 

Mr. Relli further said that in the long term, he believes the era of sustained rupee depreciation is going to end soon and that the rupee will probably head towards appreciation. He said that this number should be read from two angles. He explained that one angle is that it makes exports competitive for India and added that the country does not have significant issues with crude oil prices, which allows it to navigate higher imports even if there is a slight increase in crude prices. 

Impact on Exports and Trade Agreements 

He said that to that extent, the rupee movement is friendly for exporters and that there is an expectation of a big boost for exporters. He added that the government has also announced some measures supporting exporters and that a tariff deal is also on the anvil. He stated that the United States remains India’s largest export partner and expressed hope that the deal would come through sooner rather than later. 

Mr. Relli mentioned that the US has done deals with the UK on the pharma side and has also entered into arrangements with South Korea. He said that to that extent, the US appears more amenable and is looking to ensure deals with various countries. He added that India is one large country where terms have not yet been concluded and said that, in his view, it is only a matter of time before that happens. 

Foreign Portfolio Investors and Relative Returns 

Mr. Relli said that rupee depreciation also needs to be appreciated from the point of view of foreign portfolio investors. He noted that there has been concern and some negativity around why foreign investors are taking money out of India. He explained that if one looks at relative performance, where the S&P 500 delivers almost 16 percent returns, Nasdaq gives 21 percent returns, Hang Seng gives 29 percent returns, and Indian markets deliver around 9 percent returns along with 4–5 percent rupee depreciation, foreign investors would be better off investing in other markets. 

He added that unlike domestic liquidity, which is married to Indian opportunities, foreign portfolio investors are not married to one particular emerging market or a few emerging markets. He said they look at opportunities all over the world and invest wherever they feel the risk-reward equation is favourable. To that extent, he said their move has been good. 

Domestic Flows and Market Stability 

Mr. Relli pointed out that a positive factor for the domestic market is the robust inflows coming through SIPs, flows in NFOs, and domestic institutions such as insurers, which have been providing sufficient stability to the market. 

Earnings Visibility and Market Outlook 

Summing up his view, Mr. Relli said that earnings growth is looking good and visibility has improved. He stated that FY27 earnings growth is expected to be 15–16 percent and that the quality of earnings will also improve. He added that macroeconomic conditions are looking better, crude prices are in check, and the interest rate scenario is easing. 

He said that when all these factors are taken together, the culmination of these factors is painting a good picture for the markets. 

Final Thoughts 

Finally, Mr. Relli noted that there were flows into metals and that gold and silver prices have gone through the roof. He said that if stability emerges in gold and silver, the flows that moved into metals will sooner rather than later start flowing into equities. He added that he sees a good 18 months ahead in terms of equity markets.