The INR touched never before seen levels against
the U.S. Dollar. It touched levels of 58 today. Also there is no dearth of
analysts predicting further gloom for the INR. The reasons are the same which
have been repeated time and again, High CAD & Fiscal Deficit coupled with
policy inaction. Also sometimes there is a talk about the worldwide recession.
These factors have been present for some time
now. But has the Indian Govt. thought about it seriously. Or is everyone too
busy struggling to keep their powers/posts intact, which is now evident from a
recent spat in one the political party for the top spot.
Whatever the finance ministry or the RBI claim about
the health of Indian Economy, the way INR has tumbled against U.S. Dollar today
(close to 1.5% down in a single day)
is a ready reckoner for anyone to gauge the
health of our economy.
Recently concluded Morgan Stanley 15th
Annual India Summit 2013 in Mumbai suggested that India is not a case where
investment should be done. I don’t think there can be any more negative
statement than this; leave alone the ratings given by ratings agencies to
India.
India being a high beta market, the reaction to
any news flow is drastic. Only days coming will unfold the full & true story of the currency depreciation, as even the
finance minister himself is clueless about the recent fall.
INR is priced at one year futures price of 59.50-60.00
mark! The recent fall isn’t the end of it, there might be further downsides. RBI
may take some steps and increase US Dollar flow to rebut the recent depreciation,
in a knee jerk reaction, whereby the rupee may resist the fall in the short
term but the overall long term view of INR remains negative.
Interestingly the US Dollar index has actually fallen, so this INR depreciation can't be blamed at appreciating USD this time around.
Though the recent Inflation data shows a drastic drop in the numbers, but the economy isn't back on tracks to achieve a high growth trajectory anytime soon. Correct picture of the economy can be judged by pricing the value of INR against all major economies in the world. All EM (emerging market) currencies have depreciated and are indicative of slowdown in the world. The developed nations have to grow as they are the major consumers and give bussiness to EMs. All EMs serve to the developed nations one way or the other. Either by providing raw material or by providing services. The slowdown in the developed world has eventually trickled down to the EMs now.
As stated earlier, INR is on its way to see the worst levels against USD. When this will happen is anybody's guess!
Though the recent Inflation data shows a drastic drop in the numbers, but the economy isn't back on tracks to achieve a high growth trajectory anytime soon. Correct picture of the economy can be judged by pricing the value of INR against all major economies in the world. All EM (emerging market) currencies have depreciated and are indicative of slowdown in the world. The developed nations have to grow as they are the major consumers and give bussiness to EMs. All EMs serve to the developed nations one way or the other. Either by providing raw material or by providing services. The slowdown in the developed world has eventually trickled down to the EMs now.
As stated earlier, INR is on its way to see the worst levels against USD. When this will happen is anybody's guess!
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