StanChart upgrades short-term rating for rupee

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Standard Chartered upgrades its short-term rating for the rupee to 'neutral' from 'underweight', and revises its end-September forecast to 56 from previous forecast of 57.50, adding the cross has 'likely' hit the high for the year.

StanChart cites India's authorities' steps to promote capital inflows and s more benign global environment in a report dated on Thursday.

The bank says too early to upgrade rupee to 'overweight', says currency in REER terms is only 3 per cent below the average of the past decade and cites risks from growth and current account deficits. Maintains end-2012 target at 55.50.

The bank also adjusts forecasts for the benchmark 10-year bond yield to 8.50 per cent by end-September versus previous 8 per cent forecast.

Standard Chartered expects banking system liquidity to remain within the RBI's comfort zone, and thus says bond purchases via open market operations 'may not be required'.

Bank adds 'high likelihood' that fiscal deficit will widen to 5.5 per cent of GDP from current government target of 5.1 per cent, implying additional borrowing of Rs 400 billion.