Sensex closed on Wednesday, Indian Rupee quite
YAHOO FINANCE POSTS RUPEE.US POSTING
The Indian rupee, now partially convertible only on the current account, is set to move towards fuller capital account convertibility in a ‘gradual’ and ‘calibrated’ manner.
Announcing this in the Rajya Sabha on Tuesday in a written reply, Finance Minister P. Chidambaram said: “The movement toward fuller convertibility of [the] rupee will necessarily have to be gradual, sequenced and calibrated to the overall macro-economic situation and emerging needs of the economy.”
Mr. Chidambaram was replying to a question by a member on whether the government would expedite implementation of the scheme of rupee-dollar convertibility.
The Indian currency is now convertible only in specific current account transactions such as foreign exchange requirements for overseas travel or education purposes abroad. For investments overseas and acquisition of assets abroad, prior approval of the Reserve Bank of India (RBI) is necessary as such deals are classified as capital account transactions. On fuller convertibility so as to include capital account transactions, prior approval of the RBI would not be deemed as necessary.
Market intervention
Asked whether the Government and the central bank were pumping in huge amounts for the purchase of U.S. dollars merely to control the appreciation of the rupee, Mr. Chidambaram pointed out that the excess volatility in foreign exchange markets was being reined in through currency market intervention, as and when deemed necessary.
This, he said, was being followed up by liquidity sterilisation through issuance of treasury bills and dated securities under the market stabilisaton scheme (MSS).
“The RBI has been sterilizing the liquidity impact of such foreign exchange purchases, placing emphasis on price stability and anchoring inflation expectations,” he said.
The Finance Minister pointed out that the overall approach to management of the country’s foreign exchange reserves took into account the change in composition of the balance of payments along with the ‘liquidity risks’ associated with different types of fund flows and other requirements.
The members were also told that the appreciation of the rupee was higher in the fiscal at 8.9 per cent in July over March.
The Indian currency has been appreciating on a monthly basis against the U.S. dollar from September 2006 onwards.
Rupee / US Dollar Forex Currency News
India’s Sensitive Index fell yesterday. Housing Development Finance Corp (HDFC), the nation’s second-biggest mortgage lender, declined on concern losses tied to US subprime investments will spread, damping growth in the world’s largest economy.
The Bombay Stock Exchange’s Sensex fell 16.30 points, or 0.1%, to 15,000.91. It earlier rose as much as 0.4%. Sixteen stocks declined while 14 advanced in the index. The S&P/CNX Nifty Index on the National Stock Exchange declined 3.45, or 0.1%, to 4370.20.
“Markets will remain weak until more clarity emerges on the extent of the subprime crisis,” said RK Gupta, who manages the equivalent of $86mn of stocks at Credit Capital Asset Management in New Delhi. Oil & Natural Gas Corp (ONGC), the country’s largest oil producer, gained after crude prices climbed.
HDFC fell Rs42.3, or 2.1%, to Rs1,941.3. Bharat Heavy Electricals, the country’s largest power equipment maker, slid Rs23.4, or 1.4%, to Rs1,687. ONGC added Rs10.75, or 1.3%, to Rs853.95.
Overseas investors sold a net Rs4.08bn ($101mn) of Indian equities on August 10, according to the latest figures obtained from the Securities and Exchange Board of India’s website.
The rupee fell to the lowest in more than a month on speculation importers stepped up dollar purchases to guard against a further decline in the currency.
Losses in the rupee make it more expensive for importers such as Indian Oil Corp and Reliance Industries to raise the foreign exchange needed to pay for goods.
The rupee fell 0.3% to 40.76 against the dollar at the 5pm close in Mumbai
Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.Indian financial markets are closed on Wednesday for the Independence Day holiday. Trading resumes on Thursday.
On Tuesday, the benchmark 30-share index ended down 0.11 percent, or 16.30 points, at 15,000.91. The index is up nearly 9 percent on the year, but is 5.5 percent below a record high of 15,868.85 hit on July 24.
The cataclysmic events of last Thursday and Friday in Europe and the US took their inevitable toll of Indian markets. The Sensex fell below 15,000 and the rupee dropped past 40.60 levels against the dollar. But, in a twist to the US and the European bond markets, yields on G-Secs rose to nearly eight per cent.
There was some slippage in industrial production in June, although on a year-on-year basis for the June quarter, the fall was marginal. But there is no doubting the slowdown of the economy. Non-food bank credit is climbing after a negative first quarter, but this is likely inventory financing. Anecdotal reports do not speak of great buoyancy in new investments, which is not surprising, given the recent decline in business confidence. Thus, the increase in the MSS bonds issuing limits need set off no alarm bells on interest rates.
Where do we stand? Will the domestic economy sustain a US slowdown, is the key question.
The growth forces in recent times have, in no small measure, been asset prices, fuelled largely by foreign portfolio investment chasing the India growth story. Increased global risk aversion will affect emerging market flows. The weakening of this engine has negative implications for the stock market and, by extension, the economy, because the ‘wealth effect’ of asset price inflation was a major driver of household spending which, in turn, catalysed the cap ex boom.
The imminent increase in petroleum product prices is a dampener as well. But, agriculture, given the satisfactory rains, will be no source of worry.
The external economy, it need hardly be said, will be the first casualty of the US sub-performance.
A silver lining is the good prospect of a considerable fall in global crude prices as American growth slides, followed by other major and emerging economies. This could lift global and domestic economic spirits.
Liquidity
Liquidity in the US and the European markets disappeared overnight, as more managed funds suspended valuations and redemptions amidst non-functioning credit markets.
Clearly, leverage is the culprit. Investment in mortgage securities and their derivatives, such as CDOs, are financed with bank credit lines to capture the spread and amplify returns.
Reality has dawned on lenders, who are now realising the fragility of the underlying collateral and the almost complete absence of a market for the collateral and its valuation. Margin calls and credit freeze have followed forcing central banks to offer practically unlimited liquidity, even against non-sovereign obligations.
The problems of investors in these instruments are the least from the systemic view. The far bigger concern must be the damage to banks’ balance sheets and credit ‘withdrawal’ as they repair the damage.GOLD falling
As far as the domestic economy is concerned, a perceptible fall in growth is ahead. Inflation will be range-bound after the one-off effect of an oil price increase. Falling capital flows and a weaker rupee are in store and stocks will be sub-performers. Liquidity will be adequate and bond yields will be in a range for now, with chances of a fall later on a persisting weaker economy.
The near certainty of a severe US and European slowdown means a Fed rate cut is a done deal. It needn’t lose sleep over inflation as sharply deteriorating consumer and business spending will keep prices well in check and below the Fed’s informal two per cent limit.
The partially convertible rupee ended at 40.75/76 per dollar on Tuesday, down from Monday's finish of 40.625/635 as it posted its weakest close since June 28. It hit a nine-year high of 40.20 last month.
The 10-year government yield ended at 7.98 percent on Tuesday, level with its close on both Monday and Friday.
The Indian rupee, now partially convertible only on the current account, is set to move towards fuller capital account convertibility in a ‘gradual’ and ‘calibrated’ manner.
Announcing this in the Rajya Sabha on Tuesday in a written reply, Finance Minister P. Chidambaram said: “The movement toward fuller convertibility of [the] rupee will necessarily have to be gradual, sequenced and calibrated to the overall macro-economic situation and emerging needs of the economy.”
Mr. Chidambaram was replying to a question by a member on whether the government would expedite implementation of the scheme of rupee-dollar convertibility.
The Indian currency is now convertible only in specific current account transactions such as foreign exchange requirements for overseas travel or education purposes abroad. For investments overseas and acquisition of assets abroad, prior approval of the Reserve Bank of India (RBI) is necessary as such deals are classified as capital account transactions. On fuller convertibility so as to include capital account transactions, prior approval of the RBI would not be deemed as necessary.
Market intervention
Asked whether the Government and the central bank were pumping in huge amounts for the purchase of U.S. dollars merely to control the appreciation of the rupee, Mr. Chidambaram pointed out that the excess volatility in foreign exchange markets was being reined in through currency market intervention, as and when deemed necessary.
This, he said, was being followed up by liquidity sterilisation through issuance of treasury bills and dated securities under the market stabilisaton scheme (MSS).
“The RBI has been sterilizing the liquidity impact of such foreign exchange purchases, placing emphasis on price stability and anchoring inflation expectations,” he said.
The Finance Minister pointed out that the overall approach to management of the country’s foreign exchange reserves took into account the change in composition of the balance of payments along with the ‘liquidity risks’ associated with different types of fund flows and other requirements.
The members were also told that the appreciation of the rupee was higher in the fiscal at 8.9 per cent in July over March.
The Indian currency has been appreciating on a monthly basis against the U.S. dollar from September 2006 onwards.
Rupee / US Dollar Forex Currency News
India’s Sensitive Index fell yesterday. Housing Development Finance Corp (HDFC), the nation’s second-biggest mortgage lender, declined on concern losses tied to US subprime investments will spread, damping growth in the world’s largest economy.
The Bombay Stock Exchange’s Sensex fell 16.30 points, or 0.1%, to 15,000.91. It earlier rose as much as 0.4%. Sixteen stocks declined while 14 advanced in the index. The S&P/CNX Nifty Index on the National Stock Exchange declined 3.45, or 0.1%, to 4370.20.
“Markets will remain weak until more clarity emerges on the extent of the subprime crisis,” said RK Gupta, who manages the equivalent of $86mn of stocks at Credit Capital Asset Management in New Delhi. Oil & Natural Gas Corp (ONGC), the country’s largest oil producer, gained after crude prices climbed.
HDFC fell Rs42.3, or 2.1%, to Rs1,941.3. Bharat Heavy Electricals, the country’s largest power equipment maker, slid Rs23.4, or 1.4%, to Rs1,687. ONGC added Rs10.75, or 1.3%, to Rs853.95.
Overseas investors sold a net Rs4.08bn ($101mn) of Indian equities on August 10, according to the latest figures obtained from the Securities and Exchange Board of India’s website.
The rupee fell to the lowest in more than a month on speculation importers stepped up dollar purchases to guard against a further decline in the currency.
Losses in the rupee make it more expensive for importers such as Indian Oil Corp and Reliance Industries to raise the foreign exchange needed to pay for goods.
The rupee fell 0.3% to 40.76 against the dollar at the 5pm close in Mumbai
Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.Indian financial markets are closed on Wednesday for the Independence Day holiday. Trading resumes on Thursday.
On Tuesday, the benchmark 30-share index ended down 0.11 percent, or 16.30 points, at 15,000.91. The index is up nearly 9 percent on the year, but is 5.5 percent below a record high of 15,868.85 hit on July 24.
The cataclysmic events of last Thursday and Friday in Europe and the US took their inevitable toll of Indian markets. The Sensex fell below 15,000 and the rupee dropped past 40.60 levels against the dollar. But, in a twist to the US and the European bond markets, yields on G-Secs rose to nearly eight per cent.
There was some slippage in industrial production in June, although on a year-on-year basis for the June quarter, the fall was marginal. But there is no doubting the slowdown of the economy. Non-food bank credit is climbing after a negative first quarter, but this is likely inventory financing. Anecdotal reports do not speak of great buoyancy in new investments, which is not surprising, given the recent decline in business confidence. Thus, the increase in the MSS bonds issuing limits need set off no alarm bells on interest rates.
Where do we stand? Will the domestic economy sustain a US slowdown, is the key question.
The growth forces in recent times have, in no small measure, been asset prices, fuelled largely by foreign portfolio investment chasing the India growth story. Increased global risk aversion will affect emerging market flows. The weakening of this engine has negative implications for the stock market and, by extension, the economy, because the ‘wealth effect’ of asset price inflation was a major driver of household spending which, in turn, catalysed the cap ex boom.
The imminent increase in petroleum product prices is a dampener as well. But, agriculture, given the satisfactory rains, will be no source of worry.
The external economy, it need hardly be said, will be the first casualty of the US sub-performance.
A silver lining is the good prospect of a considerable fall in global crude prices as American growth slides, followed by other major and emerging economies. This could lift global and domestic economic spirits.
Liquidity
Liquidity in the US and the European markets disappeared overnight, as more managed funds suspended valuations and redemptions amidst non-functioning credit markets.
Clearly, leverage is the culprit. Investment in mortgage securities and their derivatives, such as CDOs, are financed with bank credit lines to capture the spread and amplify returns.
Reality has dawned on lenders, who are now realising the fragility of the underlying collateral and the almost complete absence of a market for the collateral and its valuation. Margin calls and credit freeze have followed forcing central banks to offer practically unlimited liquidity, even against non-sovereign obligations.
The problems of investors in these instruments are the least from the systemic view. The far bigger concern must be the damage to banks’ balance sheets and credit ‘withdrawal’ as they repair the damage.GOLD falling
As far as the domestic economy is concerned, a perceptible fall in growth is ahead. Inflation will be range-bound after the one-off effect of an oil price increase. Falling capital flows and a weaker rupee are in store and stocks will be sub-performers. Liquidity will be adequate and bond yields will be in a range for now, with chances of a fall later on a persisting weaker economy.
The near certainty of a severe US and European slowdown means a Fed rate cut is a done deal. It needn’t lose sleep over inflation as sharply deteriorating consumer and business spending will keep prices well in check and below the Fed’s informal two per cent limit.
The partially convertible rupee ended at 40.75/76 per dollar on Tuesday, down from Monday's finish of 40.625/635 as it posted its weakest close since June 28. It hit a nine-year high of 40.20 last month.
The 10-year government yield ended at 7.98 percent on Tuesday, level with its close on both Monday and Friday.
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