High CAD dragging down rupee, discomfiting market: HSBC

A note circulated HSBC today said the country's large current account deficit will remain a source of "discomfort" for the market and make it difficult for the rupee to appreciate in a sustained manner.

However, the rupee weakness may be limited as the trade deficit has been priced in somewhat, while debt inflows have remained 'strong' recently, the HSBC note said.

A further deterioration of the trade deficit and the speed of reforms pose risks to the rupee, HSBC added.

The bank said the country needs bolder action in the medium term to bring down the trade deficit and ease regulations to allow more foreign direct investment into the country.