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India Rupee Risks Yet to ‘Fully Play Out,’ ICICI Securities Says

Nov. 30 (Bloomberg) -- T.S. Harihar, co-head of institutional derivatives at ICICI Securities Ltd., comments on India’s economic growth outlook. He spoke by phone from Mumbai.

India’s $1.7 trillion economy expanded last quarter at the slowest pace in more than two years after the nation’s central bank raised borrowing costs by a record to tame the fastest inflation among the so-called BRIC nations.

Gross domestic product increased 6.9 percent in the three months ended Sept. 30, government data showed today. That’s the weakest since the second quarter of 2009, and matches the median of 24 estimates in a Bloomberg News survey.

On GDP data:

“While GDP numbers are in line with street estimates, the risks related to company balance sheets due to a weak rupee are yet to fully play out. Company balance sheets will be impacted by foreign-exchange losses and banks will be hit by rising non-performing assets.

‘‘The rupee slide will contribute as much as 45 percent to 50 percent to the decline in profits of Nifty companies in the next two quarters. In the three months ended September, rupee weakness may have contributed 30 percent to the earnings drop.

‘‘Industries importing will inevitably take a hit. Even exporters like software companies will lose out due to cuts in client-spending. Rupee does not look like it will come back to 46 levels anytime soon. There is pain for the next two to three quarters.’’

India’s rupee has slumped 14.6 percent against the dollar since Jan. 1, the most in Asia, increasing the cost of repaying foreign debt. Foreign convertible bonds of 25 of 28 companies in the BSE-500 Index may be redeemed when they mature by March 2013, causing an outflow of 330 billion rupees, Edelweiss Securities Ltd. said in a Nov. 23 note.

On derivative activity:

‘‘Traders are buying put options at 4,500 and 4,600 strikes anticipating a further downside. Big institutions are buying the naked put options, which indicate that Nifty may fall to as low as 4,200 levels by the end of this fiscal’’ on March 31, 2012, he said.

The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. fell 0.3 percent to 4,791.3 at 2:38 p.m. local time.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at

To contact the editor responsible for this story: Darren Boey at

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