Reuters Markey Eye - Credit Agricole expects the rupee to strengthen to 52/dollar by the end of 2013, with the currency trading at relatively attractive valuations in REER terms and having priced in "many of the fundamental problems it faces."
Key imbalances in India's economy, including the current account deficit, will gradually diminish next year, says the brokerage.
However, risk-adjusted returns will be "less impressive" given the relatively high volatility in the USD/INR, it adds.
INR will also not benefit much from improvements in risk appetite given a "very low" correlation with risk appetite, Credit Agricole says.
USD/INR has been more sensitive to gyrations in the dollar, and Credit Agricole expects a gradual appreciation in the USD index over 2013 to constrain any strong rally in INR.
Trending On Reuters
Two founding members of anti-establishment political Aam Aadmi Party (AAP) were ousted from its top decision-making panel on Saturday, deepening the rift in the party that is seen as a potential challenger to Prime Minister Narendra Modi. Full Article
Iran, powers close in on 2-3 page nuclear deal; success uncertain - officials Full Article