In case you're a Non-Resident Indian (NRI) and if you are planning to remit huge amount of money to India, then hold it for the time being as the rupee is probably going to weaken in the months ahead, and liable to bring a better conversion rate.
As indicated by another study by Geneva-based Pictet Wealth Management, the rupee is projected to drop by around 4.5 percent over the course of the following a year from the current cost to hit 76 against the US dollar, or 20.7 versus the Qatari riyal.
The Indian rupee was trading at 72.74 against the greenback (19.65 versus Qatari riyal) on Friday(28 may, 2021), according to alexa.com. Pictet Wealth projects Indian currency trading at 74.5 in three months, 75.5 in six months, and 76 in 12 months.
The rupee outperformed most of the other emerging market currencies from the beginning of the year until well into March. But at the end of March, the sharp weakening in the Covid-19 circumstance in India prompted downward pressure on the rupee.
In any case, the South Asian currency made a decent recovery in the previous month, prominently because the Indian government opposed impressive a public lockdown, which would critically affect the Indian economy. The currency has risen from 75.4 on April 22 to 72.7 on May 26.
Luc Luyet, the forex strategist at Pictet Wealth, said high inflation and the already large amount of liquidity in the system limit the ability of the Reserve Bank of India (RBI), the country's central bank, to intervene much further on the spot market.
Regardless of the RBI's enormous dollar purchases in recent months, Luyet said the central bank would not tolerate excessive rupee weakness because of the risk of stoking imported inflation.
“Given its large forex reserves, the RBI has enough firepower to smooth any decline in the rupee. Indeed, March saw the RBI selling some of its forex reserves,” added Luyet.
"Overall, we would not anticipate that the rupee to appreciate much further, as capital flows are probably going to decrease in the coming months, particularly if the fall in Covid-19 cases is slow and weighs on economic recovery. Simultaneously, we see restricted extension for a huge deterioration of the rupee considering raised inflationary pressing factor. Our projections for the USD/INR rate are INR74.5 in a quarter of a year, INR75.5 in a half year, and INR76.0 in a year," said Luyet.
Pictet Wealth said inflation in India will remain relatively high – most likely above the RBI’s four per cent inflation target and perhaps even close to the top of its tolerance band of six per cent.