Sensex and Rupee continue to move higher in lock step
Working to limit the rupee's (rupee vs. dollar) growing muscles from damaging India's export business, the government has announced a much-awaited US$345 million relief package for worried exporters. The rupee has been averaging a 9.6% climb against the US currency since January, making Indian exports more expensive and less competitive in global markets.
A record $44.9 billion worth foreign-exchange assets flowed into India this year, up from $23.4 billion in 2006. This contributed to
the cheaper dollar fetching fewer rupees punched big holes in exporters' profits.
As this article was written, the exchange rate was Rs40.41 to US$1, compared with an average of Rs45 this decade. Thailand is another Asian country facing a similar problem, where a strengthening baht is expected to shrink its exports by 12.49% in the second half of this year.
The rising rupee has caught global attention, and Time magazine termed the Indian currency's appreciation "one of this year's biggest business stories".
The Indian government's export-relief package includes increasing drawback rates on most existing export items eligible for this concession, increasing the list of export items eligible for duty drawback, and banks offering shipment credit on easier terms for small and large exporters.
India's most frequently exported items include textiles, food products from snacks to tea, engineering products, garments, marine rupee vs. dollar products, automobiles, leather goods, sports equipment and, of course, the software and outsourcing-service industries.
The textile industry is one of the worst victims of the rising-rupee story, with exporters to the US suffering losses ranging from 23% to more than 70% because of the dollar exchange rate dipping. Indian exports to the US totaled $22 billion last fiscal year, compared with the $288 billion worth of China-US exports. India also fears losing more than a quarter-million jobs because of fewer export orders, mostly in the textile industry.
The $1.5 billion Indian tea industry, the largest tea producer in the world, also took a hammering, with exports already falling behind this year by 5 million tonnes compared with last year.
The relief package hasn't come too soon, as more optimistic analysts expect the dollar to sink deeper against the rupee. Forex assets are expected to rise to $60 billion, taking India's total foreign-currency holdings to a record $260 billion.
Those gleefully cheering the rising rupee are importers and the tourism industry. Indeed, this crisis of plenty could be deeply ironic for those who remember India's desperate foreign-exchange-reserves situation in 1991, when the government ignominiously had to sell 20 tonnes of its gold holdings for $200 million to pay for imports.
When now-Prime Minister Manmohan Singh entered the cabinet as finance minister in 1991 and opened India's economy to the world, its forex holdings were $495 million, barely enough to finance imports for a fortnight. Sixteen years later, India has $218 billion in foreign-exchange holdings and worries what to do with it.
Export trade associations have cautiously welcomed the new governmental relief package, but most have appreciated the good intentions more than the actual content. Ganesh Kumar Gupta, president of the Federation of Indian Export Organizations, said the duty drawback rates should have been increased by an additional 5%. The hard-hit members of the Synthetic and Rayon Textiles Export Promotion Council agreed.
Exporters also sought more sales-tax concessions. The prevailing sentiment was that the government's move was a stopgap measure, and that the regulatory Reserve Bank of India would have to be more adroit in managing the increasing forex inflows. The RBI has already purchased $24 billion in US currency this year to keep the rupee in check.
Finance Secretary D Subbarao said he hopes the new sops will ease the way to reach the $160 billion export target for the current fiscal year, and added that the drop in exports cannot be fully blamed on the rising rupee.
A recent report by the Federation of Indian Chambers of Commerce and Industry agreed with him. It said inadequate port and shipping facilities are among the biggest roadblocks to India achieving the current export target and the $200 billion export target for next year.
Local analysts say another long-term solution is to usher in capital account convertibility (CAC, or freedom to convert local financial assets into foreign financial assets, and vice versa, at market rates). Finance Minister P Chidambaram told the India-Europe Investment Forum in London this month - the European Union is India's biggest investor, contributing 25% of foreign direct investment in the country - that India is gradually moving toward CAC.
"There is de facto full capital account convertibility for non-residents: they can bring in their money and they can take out their money," Chidambaram said, and pointed out that foreign investors too can bring in capital and take home their profits, dividends, capital, capital gains and royalties.
For now, more foreign investors largely mean bad news for India's exporters.
Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.
India's Sensex landed at the positive territory on Wednesday after traversing along the flat line,( GOLD / UD DOLLAR FOREX CURRENCY - RUPEE) as a late buying support helped the market recover from early profit booking.
India's benchmark index BSE Sensex added 11.35 points or 0.1% to close at 15,301.17 after moving between 15,160.27 and 15,325.78. Realty sector led the gains with the sub-index climbing 128.68 points or 1.6%. The consumer durables sub-index gained 33.78 points or 0.8%. The auto sub-index improved 33.97 points or 0.7%. The capital goods sector lost 127.75 points or 1%. Falls outnumbered rises by 1,490 to 1,141.
The broader S&P CNX Nifty was up 2.80 points or 0.1% to close at 4,499.55 after moving between 4,452.85 and 4,510.80.
On the Sensex, Sobha Developers gained 2.7% and Mahindra Gesco Developers climbed 2.5%. Akruti Nirman surged up 4.3%. DLF vaulted 5.8% after the company won from the Delhi Development Authority a Rs 6,000-crore project, which requires DLF to design, develop and operate an international convention center.
Euro / Rupee and Yen / Rupee. Gitanjali Gems shot up 10% and Titan Industries increased 1%. Rajesh Exports increased 1.2% on reports that the company won an order worth Rs 272 crore to supply gold jewellery to Lazorde Jewellery of Kuwait.
Hero Honda rose more than 3% and Cummins India improved 1.4%. Bajaj Auto jumped 2.9% on recent reports that the company is planning acquisitions with possible preys being Ducati Motor Holding of Italy and Triumph Motorcycles of the UK.
Crompton Greaves soared 2.7%, while L&T tumbled 2.6%. Carborundum Universal gained 2.3%, but Greaves Cott fell 2.3%.
Bharti Airtel climbed 2.3%. The company said it gave a $2 billion contract to Sweden's Ericsson for network expansion.
Reliance Energy declined 1.4% even after reporting a 25.5% year-over-year rise in net profit for the first quarter to Rs 221.56 crore from Rs 176.61 crore.
IDBI slumped 3.1%. The company reported that first-quarter net profit rose a marginal 1.7% to Rs 153.12 crore from Rs 150.57 crore in the same quarter previous year.
Biocon added 0.3% after Euro / Rupee and Yen / Rupee.reporting a 63% year-on-year jump in first-quarter net profit to Rs 44.86 crore from Rs 27.57 crore.
On the Nifty, Satyam Computers gave up 1.6% and ITC shed more than a percent. Infosys Technology was up 0.3% and ACC climbed more than 2%. TCS advanced 0.9% and ICICI Bank improv
A record $44.9 billion worth foreign-exchange assets flowed into India this year, up from $23.4 billion in 2006. This contributed to
the cheaper dollar fetching fewer rupees punched big holes in exporters' profits.
As this article was written, the exchange rate was Rs40.41 to US$1, compared with an average of Rs45 this decade. Thailand is another Asian country facing a similar problem, where a strengthening baht is expected to shrink its exports by 12.49% in the second half of this year.
The rising rupee has caught global attention, and Time magazine termed the Indian currency's appreciation "one of this year's biggest business stories".
The Indian government's export-relief package includes increasing drawback rates on most existing export items eligible for this concession, increasing the list of export items eligible for duty drawback, and banks offering shipment credit on easier terms for small and large exporters.
India's most frequently exported items include textiles, food products from snacks to tea, engineering products, garments, marine rupee vs. dollar products, automobiles, leather goods, sports equipment and, of course, the software and outsourcing-service industries.
The textile industry is one of the worst victims of the rising-rupee story, with exporters to the US suffering losses ranging from 23% to more than 70% because of the dollar exchange rate dipping. Indian exports to the US totaled $22 billion last fiscal year, compared with the $288 billion worth of China-US exports. India also fears losing more than a quarter-million jobs because of fewer export orders, mostly in the textile industry.
The $1.5 billion Indian tea industry, the largest tea producer in the world, also took a hammering, with exports already falling behind this year by 5 million tonnes compared with last year.
The relief package hasn't come too soon, as more optimistic analysts expect the dollar to sink deeper against the rupee. Forex assets are expected to rise to $60 billion, taking India's total foreign-currency holdings to a record $260 billion.
Those gleefully cheering the rising rupee are importers and the tourism industry. Indeed, this crisis of plenty could be deeply ironic for those who remember India's desperate foreign-exchange-reserves situation in 1991, when the government ignominiously had to sell 20 tonnes of its gold holdings for $200 million to pay for imports.
When now-Prime Minister Manmohan Singh entered the cabinet as finance minister in 1991 and opened India's economy to the world, its forex holdings were $495 million, barely enough to finance imports for a fortnight. Sixteen years later, India has $218 billion in foreign-exchange holdings and worries what to do with it.
Export trade associations have cautiously welcomed the new governmental relief package, but most have appreciated the good intentions more than the actual content. Ganesh Kumar Gupta, president of the Federation of Indian Export Organizations, said the duty drawback rates should have been increased by an additional 5%. The hard-hit members of the Synthetic and Rayon Textiles Export Promotion Council agreed.
Exporters also sought more sales-tax concessions. The prevailing sentiment was that the government's move was a stopgap measure, and that the regulatory Reserve Bank of India would have to be more adroit in managing the increasing forex inflows. The RBI has already purchased $24 billion in US currency this year to keep the rupee in check.
Finance Secretary D Subbarao said he hopes the new sops will ease the way to reach the $160 billion export target for the current fiscal year, and added that the drop in exports cannot be fully blamed on the rising rupee.
A recent report by the Federation of Indian Chambers of Commerce and Industry agreed with him. It said inadequate port and shipping facilities are among the biggest roadblocks to India achieving the current export target and the $200 billion export target for next year.
Local analysts say another long-term solution is to usher in capital account convertibility (CAC, or freedom to convert local financial assets into foreign financial assets, and vice versa, at market rates). Finance Minister P Chidambaram told the India-Europe Investment Forum in London this month - the European Union is India's biggest investor, contributing 25% of foreign direct investment in the country - that India is gradually moving toward CAC.
"There is de facto full capital account convertibility for non-residents: they can bring in their money and they can take out their money," Chidambaram said, and pointed out that foreign investors too can bring in capital and take home their profits, dividends, capital, capital gains and royalties.
For now, more foreign investors largely mean bad news for India's exporters.
Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.
India's Sensex landed at the positive territory on Wednesday after traversing along the flat line,( GOLD / UD DOLLAR FOREX CURRENCY - RUPEE) as a late buying support helped the market recover from early profit booking.
India's benchmark index BSE Sensex added 11.35 points or 0.1% to close at 15,301.17 after moving between 15,160.27 and 15,325.78. Realty sector led the gains with the sub-index climbing 128.68 points or 1.6%. The consumer durables sub-index gained 33.78 points or 0.8%. The auto sub-index improved 33.97 points or 0.7%. The capital goods sector lost 127.75 points or 1%. Falls outnumbered rises by 1,490 to 1,141.
The broader S&P CNX Nifty was up 2.80 points or 0.1% to close at 4,499.55 after moving between 4,452.85 and 4,510.80.
On the Sensex, Sobha Developers gained 2.7% and Mahindra Gesco Developers climbed 2.5%. Akruti Nirman surged up 4.3%. DLF vaulted 5.8% after the company won from the Delhi Development Authority a Rs 6,000-crore project, which requires DLF to design, develop and operate an international convention center.
Euro / Rupee and Yen / Rupee. Gitanjali Gems shot up 10% and Titan Industries increased 1%. Rajesh Exports increased 1.2% on reports that the company won an order worth Rs 272 crore to supply gold jewellery to Lazorde Jewellery of Kuwait.
Hero Honda rose more than 3% and Cummins India improved 1.4%. Bajaj Auto jumped 2.9% on recent reports that the company is planning acquisitions with possible preys being Ducati Motor Holding of Italy and Triumph Motorcycles of the UK.
Crompton Greaves soared 2.7%, while L&T tumbled 2.6%. Carborundum Universal gained 2.3%, but Greaves Cott fell 2.3%.
Bharti Airtel climbed 2.3%. The company said it gave a $2 billion contract to Sweden's Ericsson for network expansion.
Reliance Energy declined 1.4% even after reporting a 25.5% year-over-year rise in net profit for the first quarter to Rs 221.56 crore from Rs 176.61 crore.
IDBI slumped 3.1%. The company reported that first-quarter net profit rose a marginal 1.7% to Rs 153.12 crore from Rs 150.57 crore in the same quarter previous year.
Biocon added 0.3% after Euro / Rupee and Yen / Rupee.reporting a 63% year-on-year jump in first-quarter net profit to Rs 44.86 crore from Rs 27.57 crore.
On the Nifty, Satyam Computers gave up 1.6% and ITC shed more than a percent. Infosys Technology was up 0.3% and ACC climbed more than 2%. TCS advanced 0.9% and ICICI Bank improv
posted by Howard at
8:47 AM
.png){kind=small}
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home