The rupee has spent a happy week so far amidst positive domestic and international turnarounds. So far, the national currency has made a smart come back from near to the edge of 70 per dollar to 63.4 within a week and couple of days time. A positive trade data has pulled the currency first, followed by some surprising policy indication by Dr Raghuram Rajan. An aborted Syrian intervention and softened crude prices produced relief. Weak US employment data strengthened Rupee’s confidence in the market. As per the SEBI data, one out of every five foreign investors who have flown during the last three months has returned. This is felt in the stock market even. Despite no
The government has come out with some timely export promotion measures to utilize the opportunities of a depreciated rupee. As a fresh measure, the Duty Drawback scheme is better incentivized to allow exporters to refund or claim the different taxes they have paid-excise, customs and services, in the production of the exportable commodity. As per the change, the rate for duty credit has increased and more items are included under the scheme to promote export production. According to the Ministry of Finance, the new will come into effect from September 21. The restructuring of the scheme by including more commodities and increasing the tax credit rate will reduce the prices of exp
A week ago, in the cover of declining rupee and shrinking FDI inflows, US based Mylan pharma has acquired Bangalore based Agila Specialities for a whopping figure of Rs 5158 crore. The Cabinet Committee on economic Affairs, the executive body responsible for approving FDI above Rs 1200 core has ratified the acquisition. The takeover was ratified after intense discussions within the government wings, and finally the US Company was able to complete the strategic takeover of Agila which is a specialist in vaccine and injectable-drug making. Mylan’s Agila acquisition was the last one of a serial of takeovers by foreign pharma companies in India. Increasing acquisitions in the p
A number of positive developments lead by positive trade data for August has enabled the stock market and the Rupee to make strong gains on Tuesday. The Rupee registered gains of 140 paise, while the stock market made biggest single day gain since in the last four years. Foreign investors pumped nearly 2000 crores rupees on equity and debt markets. The news of shrinking trade deficit came as good news for the second month in succession. Others, especially international developments also added to the positive momentum in the economy. The US job data has shown that unemployment is reluctant to come down there. The implication is that the Fed may slow down tapering programme
The financial market in the country may undergo severe pains in the coming days with the prospects of downgrade by prominent rating agencies. So far, the different rating institutions are waiting to assess the net result of different counter measures and follow ups made by the government and the RBI to overcome the present crisis related to capital outflows and rupee decline. Once the rating agencies starts downgrading one by one, the net impact is that the corporate fund raising overseas will become costly and foreign institutional investment into the country will worsen. Many foreign institutional investors heavily track on ratings. Altogether, downgrading may further discourag
Prime Minister Dr. Manmohan Singh has described the present crisis in the economy is bad, but is a part of the correction process. In a statement in the Parliament, he said the economy is not moving towards a 1991 type situation. Main factor that has produced the problem is the current account deficit. He expressed that the depreciated rupee will promote exports in the coming months. Dr. Singh’s observation has pulled the currency down slightly during Friday trading hours. The national currency was supported by dollar swap to PSU oil companies by the RBI in the previous day. The Prime Minister also acknowledged the role of US Fed’s tapering in triggering the cr
The government’s currency swap agreement efforts with major trading partners are implementable in the long run. Currency swap agreements enable partners to exchange local currencies at a predetermined exchange rate. But it will take time lag for currency swap agreements to be effective as it need consultation with partners. Internationally, governments are on a risk averse mode, fearing a big crisis. Hence, credible foreign exchange holding countries may not be generous to engage in bilateral currency protection measures with India seriously. There are already a large number of currency swap agreements especially those initiated by China. Beijing was always skeptical
The rupee has made a badly needed come back against the dollar as the RBI has launched dollar swap for three major public sector refiners. As a result, the Rupee appreciated against the dollar; ending severe depreciation during the previous two days. The RBI revealed that the measure will continue in the coming days as well. A welcome feature of the RBI measure is that the swap facility will be available in the coming days also until a notice from the central bank comes. Technically the effect of the measure is RBI selling of dollars worth $300-500 million in the market daily. The foreign exchange swap window offered by the RBI to three largest refiners is estimated to be
The Rupee has registered the biggest daily fall today after 1993, as it fell by 3.9 percent to 68.75 as currency crisis deepens. The currency has marginally edged back to 68.31 after invisible dollar selling intervention by the RBI. Foreign investors sold heavily in the debt and equity market fearing further loss due to weakening of the currency. With the present fall, the rupee became the worst affected among the emerging market currencies beating the Turkish Lira. In the last three months, the Indian currency has lost its value by nearly 23 per cent. &n
It seems that the government has lost control over the rupee. The rupee is the worst performer among the EMEs ever since May 22, when Mr.Bernanke announced the reduction of Fed’s bond purchase programme. The current programme of tapering just is the beginning of reducing the Fed’s bond purchase programme. So far, the Fed is slowing the purchase of bonds. Once it starts selling the accumulated bonds, dollar will fly back from the financial markets to the Fed’s vault. In the coming months, especially in early 2014, the Fed should start selling the purchased bonds. Here, the impact will be much more painful. There will be severe shortage of dollar and global liquidi
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