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Reuters Market Eye - The rupee is likely to strengthen towards 53 per dollar by end-March and gain further towards 50 by end-December, HSBC says in a report.
However, the bank says the backdrop for the rupee will remain challenging due to the twin deficits and the government's difficulty in tackling them ahead of the state elections scheduled for this year.
The bank calls recent steps taken by the government "positive and constructive in addressing these deficits".
However, HSBC adds, the current account deficit is unlikely to narrow significantly unless government is able to control the widening trade deficit, particularly oil and gold imports.
Reporting by Swati Bhat