Lehman sees rupee at 36/$ by FY09 end

Lehman sees rupee at 36/$ by FY09 end
26 Sep, 2007, 1811 hrs IST, INDIATIMES NEWS NETWORK

MUMBAI: Lehman Brothers has maintained its call that the rupee would appreciate to 39 to the dollar by the end of 2007 and 36 by end-2008, despite Reserve Bank of India easing overseas investment norms of Indian companies.

The investment bank expects RBI to take the middle path by "allowing some rupee appreciation but managing its pace, continuing to mop up liquidity and further encouraging capital outflows."

The RBI Tuesday announced following measures aimed at liberalising capital outflows.

• Investment in overseas joint ventures/wholly owned subsidiaries by Indian companies permitted up to 400 per cent of the net worth, from 300 per cent.

• Limit for portfolio investment abroad by listed Indian companies raised to 50 per cent of net worth, from 35 per cent.

• Prepayment limit for external commercial borrowings raised to $500 million from $400 million.

• Overseas investment limit for mutual funds raised to $5 billion from $4 billion.

• Annual remittance limit for individuals enhanced from $100,000 to $200,000.

In August, the finance ministry had imposed restrictions on external commercial borrowings to restrict inflows.

Although the RBI move is expected to encourage capital outflows in the medium term, it is unlikely to cause a sharp increase in outflows immediately, since existing limits have not been fully exploited, Lehman says.