Financial services major Credit Suisse on Monday said the government is likely to support rupee as the rapidly falling local unit is causing visible pressure on the country's oil and fertilisers deficit bill.The rupee is likely to stay in the range of 41/42 per US dollar by the year end, it said.
"Every one per cent depreciation of the rupee causes 0.15 per cent rise in the government's oil and fertilizers subsidy deficit. We expect that the government would support rupee from further fall. The rupee is likely to reach 41/42 per dollar by the year-end," Credit Suisse Securities' principal head of research, Nilesh Jasani said.
The home currency had touched a record 13 month low of 43.21 per US dollar in last month prompting the government to take steps to support the unit.
These comprised the relaxation of External Commercial Borrowings (ECB) norms. Besides, the high crude oil prices in the international market and the consequential inflationary pressures might prompt the Reserve bank to take actions on key rates, Jasani said.
"..given this, amongst other factors, we expect the Sensex reach at around 13,000 by the year-end," he said. The Rupee opened sharply lower against us dollar at Rs 42.90/93 per dollar on the inter bank foreign exchange market on Monday.
Why the Indian markets are falling
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