Hitendra Dave of HSBC India said the speed of fall of the rupee was more surprising rather than direction. If flows remain the same, rupee could stay within 41-42 to a dollar, he said.

While Vispi Patel of Centrum Direct is of the view that rupee will likely breach 42/USD levels in next two to three sessions, and may stabilise in the 41.05-42.10/USD band.

Excerpts from CNBC-TV18’s exclusive interview with Hitendra Dave & Vispi Patel:

Q: Are you surprised at the ferocity or the sharpness of this depreciation and do you think we are headed towards more than 42?

Dave: From a market perspective, perhaps the surprising element was the speed of change and the extent of the change. The direction per say may not have surprised lot of the market participants. For sometime now, there was this talk that the rupee’s moves over the last two years or so had been premised to the extent of the capital flows and since those were seen to be slowing down quite a bit in response to the domestic factors as well as the international financial situation - there was an expectation that the one-sided movement which is of rupee appreciation would halt and then may be even reverse direction a little bit. So I don’t think the directional change has caught many by surprise. But the fact that it all happened within a week or ten days and the extent of it, I’m sure it has caught most market participants by surprise.

Q: What do you think - is it done for the moment or do you think we are looking at more than 42 next week?

Patel: I agree with Mr Dave on the surprise element. Yes, there were major market players who were not very surprised Rupee was definitely under pressure for a long time for getting appreciated for such a long time against the dollar. Now as you see the global scenario the dollar is appreciating with regards to all currencies, infact only till yesterday other currencies have stabilized but I still foresee that it will breach the 42 levels in 2-3 trading sessions.

Q: The shocker has been the pace of the way rupee has moved. Is it your sense that this is the durable move for the rupee or do you think it is a short-term phenomenon?

Dave: Obviously I think such a strong move cannot continue - you will have a period of a pause and I guess people will see what is the reaction of the exporter community. On the bulk import, we do know that oil and the defense sector has been buying for quite sometime and they continue to remain so and as all prices go higher, their demand for dollar is likely to continue to remain strong.

The issue which will determine whether we pause at somewhere between current levels at Rs 42 to the dollar and go back little bit towards Rs 41/ dollar or stay at current levels would be determined mostly by what the reaction of the exporter community would be.

My sense would be that we stay between current level and at Rs 42/USD, you would see quite a few exporters who have stayed away from selling or have stepped forward to sell spot as well as a bit for the longer period also.

Q: By way of a trade, how would you trade the rupee now and what would you do if it does hit that 42/USD mark, would you start booking out at that point or do you think it could go higher to about 42.50/USD?

Patel: Looking at today’s market, I would still hold to for couple of hours because now it has started looking like stabilizing at Rs 41.62-41.63/USD levels and I perceive it to go about Rs 41.85-41.88/USD levels today. So I would still hold on. My sense is that this stoploss should be at Rs 41.30-41.35/USD - this is what I perceive for the rupee to happen by the end of this month. But I’m sure looking at the present levels, it will definitely cross Rs 42/USD. Once it breaches the Rs 42/USD levels then it will stabilize at Rs 42.05-42.10/USD.

Q: Over the next one-quarter or next three months, if the flows do not change in a major way, where do you see the rupee stabilizing closer to 42/USD or closer to 40/USD?

Dave: I guess if flows remain as we have seen today which is largely that you continue to run a trade deficit, a current account deficit and the capital account. You don’t have the lumpy flows that we saw last year in most of the last 2-3 years, than I would see that the rupee’s probability of staying within 1% or 1.5% of the current level is very high. So I would see it going to 40/USD as a low probability item somewhere between 41-42/USD is my sense of that.