4. Fact of The Previous Year 2011
The year 2011 has been one of the worst years
for the Indian rupee.
The rupee has virtually crashed, posting the
biggest annual loss since 2008.
This is a huge loss in the rupee value — close
to 16 per cent drop against the dollar.
5.
6. Reasons for Rupee Low
The strong demand for the dollar globally
(because of the turmoil in the euro zone),
The greenback is expected to climb further
with most other currencies.
Domestic factors like high inflation and rising
crude price would put further pressure on the
rupee.
“Capital inflow is a major bottleneck here ,”
By: Roy Paul ,DGM , Federal Bank.
7. Reasons for Rupee Low
FIIs pulling out or not putting new money into
the market and because some of the oil
payments that India had to give out in the last
several weeks.
The rupee would end up potentially
depreciating more than others currency.
The rupee is low due to feeble trade deficit
numbers and weak global sentiment.
8. An Opportunity when Rupee Low
Most of the trading funds to bring money into
India and gain on two counts;
1. One on rupee appreciation in subsequent
period and
2. The stock price appreciation as well.
9. Why High Demand for Dollars?
• Regulator has only a reserve of around USD
320 billion to meet country's import
requirements for 6-8 months.
• FCCB repayments, due in 2012. Kotak
Institutional Equities,$5.6bn.
10. Conclusion:
• The fundamentals and market dynamics
continue to remain bearish.
• There is severe pressure on:
Trade/current account;
Flows into debt capital market is down and
not expected to revive soon;
FII flows into equity capital market will be
down not ruling out reverse flow ahead of
their financial year end.
Notes de l'éditeur
The term greenback refers to paper currency that was issued by the United States during the American Civil War.[1] There are at least two types of notes that were called greenback:United States NoteDemand NoteFIIs have not sold shares aggressively despite the weakness in both the rupee as well as equities. But should the rupee slide further for whatever reason, it could trigger a vicious circle wherein FIIs would start pulling out money from shares, which in turn would weaken the rupee, and in turn spark more selling from other foreign investors.Specifically to India, foreign institutional investors are in no hurry to invest in our equity market due to a combination of domestic and global concerns.
