The Hindu Business Line : `Foreign inflows bound to create pressure on dollar'

Mumbai June 7 With the primary market slated to mop up around Rs 50,000 crore, there are conflicting views on what it could spell for the rupee-dollar rate.

According to some experts, the dollar may come under further pressure as they estimate the foreign institutional support to these offerings to be in the region of Rs 10,000 crore.

Mr Kalpesh Parekh, Head of Institutional Sales, ASK Securities India Ltd, said: "It would suck up some of the liquidity, but expectations of the rupee touching 35-36 levels are far-fetched. Close to 39 would be more realistic. It would have a significant negative impact on export revenues. And, some pressure is likely to be felt for 3-6 months."

The India head of an asset advisory company, who did not wish to be named, said that inflows in the range of Rs 10,000 crore were bound to create additional pressure on the dollar, given the anticipated contraction in the US economy.

In his view, overseas investors consider valuations in the Indian market to be high. His company manages funds for two internationally listed companies with primary investment of about $250 million.

Rupee movement

Tracking the future course of rupee, a recent Mecklai report said: "In the short term, the rupee is expected at 41.5 (due to stabilised capital inflows) and in the medium term, its value would range between 41 and 43.5. In the long term, the rupee is predicted to appreciate again and stand at 38."

But French investment bank Calyon has a contrary view. It has said that the rupee is likely to slip from a recent nine-year peak as a global reversal in risk appetite triggers a wave of capital outflows. "A possible correction in the Chinese stock market could spill over to India, and foreign funds that poured a net $3.9 billion into local equities this year could begin to withdraw."

Public issues

DLF, whose IPO is slated to hit the market on June 11, will set the ball in motion for a flurry of such offerings over the next six months.

The DLF issue will be followed by Omaxe, another real estate firm, which is planning to raise Rs 1,500 crore.

Other issues to follow are Hindusthan Development and Infrastructure Ltd (Rs 2,500 crore), National Hydroelectric Power Corporation (Rs 2,000 crore) and Power Grid Corporation of India (Rs 1,500 crore).

Besides, follow-on issues slated for the next two months include those of ICICI Bank (Rs 15,000 crore), SBI (Rs 12,000 crore) and HDFC (Rs 4,000 crore).