We are seeing a weakness in the rupee. On the other hand, there is news flowing about cash crunch in different pockets of the country. Do you think it will have any impact on exchange rate or rupees performance?
There are two elements – one is the actual flows which remarkably over the last 18 months is pointing to a weaker rupee. However, the rupee has not weakened substantively during this period.
The other force, is sentiment. When people feel that things are getting a little rocky, they are likely to get out of the market. The cash problem is one of the factors that is probably pushing the rupee down a little bit. But investors are still bringing in money.
Also, since RBI is intervening to prevent additional weakness at this point, we can see a little intraday volatility for now.
Therefore, rupee should weaken more. It should be under more pressure than it is right now but at present, it is holding on its own.
Central banks are looking to reduce balance sheets. Do you think this asset price inflation that one is seeing across the board can change anytime soon?
The only thing that can really take the rupee down is if there is a major problem globally as that would change the investment sentiment, although it does not seem to be happening. I still feel markets are very high but the large financial players globally seem to feel that the bull run has still has life left in it.
Again, I read an article the other day that said that the expansion has been running for so long that recession is likely on its way by second half of 2019. This means that markets may start to wobble about a year from now. But markets are markets. It may not be true. The important thing is just to hang in there and run everything with a very tight and disciplined stop loss because things can turn at any time.