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Rupee can fall up to 66/$; ultra bearish on banks: Quantum

Sanjay Dutt, director, Quantum Securities is worried about the currency fall in the emerging markets. According to him, the rupee is likely to depreciate to 65-66 against USD going ahead. The Indian currency Tuesday weakened past 63 against USD for the first time since January 28.

Speaking to CNBC-TV18, Dutt says Indian market may correct another 5 percent if rupee falls further. He believes equities have become over owned now and it is better to wait and not buy on dips at the moment. 

Dutt is bearish on banks now and expects massive downside in this sector.

Below is verbatim transcript of the interview:

Q: Do you think there is more downside to come? We are distance away, over 5 percent of the near-term or the all-time highs of 8,630. Do we have more to go in the next couple of months?

A: I think so because the major support of 8,300 has been broken, forget the technical, what is worrying me is the currency landscape that we are seeing across the world.

If you look at the emerging market currencies whether the rupiah, the Turkey lira or whether you look at the Brazilian currency, all of them have got slammed and are approximately 5-7 year lows versus the dollar, of course forget the ruble that the rout is playing out.

However, given this backdrop I will not be surprised that we will see a lot of volatility in the rupee and probably heading to somewhere in 65-66/USD range soon. If that be the case and if that’s the thesis that is going to play out, the market is headed for a deeper cut, probably another 2-5 percent. Therefore, I would keep an eye on the currency more than the indices here and the stocks here.

Q: What are you basing this fear on? Are you comparing this with peso crisis of ’94, the Asian currency crisis of ’98? Just a fear that it will be a basket selling of emerging markets (EMs).

A: It will be a basket selling of EMs. We will stand out of the lot and be least impacted or will suffer the minimum damage because our internal fundamentals are good and people did read the message that the Reserve Bank of India (RBI) Governor gave out few days back when he got into ‘Make in India, Made for India’ controversy that played out in India in some spaces.

He sent a clear message that all central bankers do more job owning than real specific direction to financial market players as well as main street policymakers. Therefore, over the next few months that is the place to watch out.

If we get some stability there then the market will stop here, consolidate and stand to move up. Otherwise, there is pain ahead in equities even in Indian equities and we are kind of over owned; we are over owned in any case because everybody is bullish on India for the last few months.

When we spoke towards the end of November, I was quite clear that we had seen the highs for the calendar year, so my sense is to look at the currency, to look at the flows, those are more important than looking at anything else within India at this point in time.

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