Rupee's slide may lure back foreign investors

ANALYSTS SEE CURRENCY’S DEEP UNDERVALUATION COULD REVIVE FOREIGN PORTFOLIO INFLOWS INTO EQUITIES

- SUBHADIP SIRCAR & ASHUTOSH JOSHI

AFTER BREACHING THE 90-per-dollarmark, the rupee may finally be cheap enough to tempt investors back.Analysts at Elara Capital and Yes Securities say the currency’s sharp undervaluation has historically preceded a revival in foreign portfolio inflows.

Elara analysts led by Garima Kapoor said the nation’s 40-currency real effective exchange rate, or REER, was 97.47 in October — just under one standard deviation below its historical average — and added that equity inflows typically pick up pace one to two quarters after this gauge bottoms out. A value below 100 means the currency is undervalued relative to its peers.