2012 will help INR to appreciate considering all factors

The main reason why Indian Rupee depreciated during 2011 was wider trade deficit, portfolio outflow and lackluster intervene by RBI as compared to other Central Banks. At the end of the year RBI & Government both announced certain policy decision to cool  down speculative transaction but the impact was not enough . But the efforts has helped to put a check. In 2012 the only trigger which can boost INR appreciation is Investors confidence in India. So immediately the INR will not appreciate but at the same time it will not depreciate too much from here onwards. Growth concern will not allow rupee to appreciate in the short term but positive policy decison by Government may boost Investors sentiments gradually. As per my personal view INR will come back to 48.50 by the end of 2012 .The GDP growth is expected to be appx 7% for FY 12 but after that in FY 13 the growth prospect is bright. RBI has already stopped hiking interest rate in its last review and coming 24^th January review it may cut the CRR by 50 BPS and in second quarter of 2012 calendar year the interest rate may start decreasing. In 2012 RBI is expected to bring down the interest rate by 150bps .The food inflation rate which was at one point of 2011 was 35% in one week has come down to negative 3,5% in latest release . This will help the Monthly inflation rate coming down to 7.5% in December 2011. By March 2012 the Monthly inflation may come down to 6.5%. The only concern for Inflation rate in 2012 is the way Crude price behave. The trade deficit is a serious concern for FY 12 but going forward Non Oil import particularly Gold is likely to slow down significantly. This will keep the trade deficit under control .Portfolio investment is not likely to improve at least till June 2012 as this is more relating to International factor and less due to India Factor . Euro Zone crisis will continue for some long time and India Growth hope is not likely to revive till June 2012. The only hope of Portfolio investment accelerating in H1 2012 is if US declare QE III which is expected. 17 Billion USD is falling due for redemption in the form of ECB loan and FCCB loan during FY13 and this will be a critical factor for Rupee direction.RBI may not do direct intervention by selling USD in 2012. This was the approach in 2011 also. This is because India Forex reserve position is decreasing slowly and has touched USD 296 Billion recently. Government may take series of steps in coming Months to attract foreign fund. It has already announced direct Investment by Foreign Institutional investors and deregulated interest rate on NRE deposit. We hope all will go good for INR in 2012