The Indian rupee fell 28% from 30-Apr to 28-Aug. Its worst fall since 1991 and the second worst in 40 years, says Credit-Suisse in a research note. What makes this worse is the fact that while previous declines of this scale were deliberate (in the 1960s) and discrete (1991), this latest crash wasn't. It was all driven by a crisis of confidence rather than anything else, says Credit Suisse.
Some $13 billion exited in the months of July and August as corporates panicked and tried to hedge themselves.
And as the rupee continues to remain unpredictable–currency volatility already is at the highest seen–it will likely claim more victims in the coming weeks, says Credit Suisse.
The thing to watch will be the next earnings reports as there may be surprises–or shocks–in there.
"Prior periods of INR volatility have been followed by confessions by corporates of violation of internal hedging norms," Credit Suisse says. "Mis-priced import and export hedges or complex currency derivatives are likely to get exposed."
Given the fear trade that drove the massive decline of the rupee, it can't be over so quickly, after all.
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