Beruflich Dokumente
Kultur Dokumente
www.ramakrishnavadlamudi.blogspot.com
After touching an all-time low of 68.80 on 28 August 2013, the Indian rupee has resurrected miraculously to 63.48 by 13Sep2013 against the US dollar. The amazing upsurge of rupee by almost eight per cent in just a matter of two weeks has been attributed to various reasons. In this backdrop, let me try to dig deeper and come out with my own theory.
As explained simply in the above graph, various reasons could be attributed to the rise of rupee in the last two weeks. All these things, were able to tell with the benefit of hindsight. If youd asked the finance minister P.Chidambaram what went right with the rupee, he would have smiled very confidently and responded by saying that I told you so! If youd asked the so-called market experts they would say it was the Rajan Effect. It was global factors such as oil prices cooling off following the US postponing its potential attack on Syria, others would argue. Some even attributed rupees recovery to Indias trade deficit easing a bit in August 2013. The overwhelming rise in Indian stock markets too helped the rupee gaining ground; and in fact the reverse is also true! Global markets too have rallied smartly last week. Media headlines often dont tell the full story.
Page 2 of 4
To Sum Up:
We cant definitely point out the real reasons behind the rupees rise. It could be a combination of factorswild swings in investor sentiment, the slew of measures announced by the RBI, FIIs coming back to India once stocks become cheaper, OMCs going out of the foreign exchange market or some factors unknown to us! The fact of the matter is: We dont know for sure. Its in the nature of markets to swing between moods of downright pessimism and lofty exuberance. As George Soros put it in his book The Alchemy of Finance: The stock market is generally believed to be anticipating recessions; but it would be more correct to say that it can help to precipitate them. Markets are always biased in one direction or other. Markets can influence the events that they anticipate. Markets have a way of making predictions come true!
Page 3 of 4
A noted economist Bibek Debroy recently tweeted: Domestic actors not domestic factors are responsible (must be a typo). The fate of Indian rupee largely hinges on the fortunes of Indian economy. Of course, we cant rule out global factors also. The rupee will continue to be volatile driven by external and internal factors. Some sense seems to have come to the rupee market in the last two weeks. While the positive sentiment may continue in the short-term, itll be back to basics in the medium to long term. Crisil has said that the rupee may rebound to 60 per dollar by March 2014. I tend to go with that figure, with plus or minus two. ---
Related Articles:
Indias GDP Growth Slows-10Sep2013: http://ramakrishnavadlamudi.blogspot.in/2013/09/india-gdp-growth-slows-vrk10010sep2013.html Strengths and Weakness of Indian Economy-01Sep2013: http://ramakrishnavadlamudi.blogspot.in/2013/09/indian-economys-strengths-and.html
http://ramakrishnavadlamudi.blogspot.in/
http://www.scribd.com/vrk100
Connect with him on twitter @vrk100
Page 4 of 4