Indian Rupee, Oil, Gold and other currencies with real value

Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.

The Indian rupee advanced to a 10-day high against the US dollar during early Asian deals on Friday. By about 9:10 pm ET, the rupee fetched 42.77 against the buck, compared to Thursday's New York session close of 42.86. In economic news, India will announce inflation report for the week ended June 28. For the week ended June 21, the inflation rate was 11.63 %
Shares on Karachi Stock Exchange ran into deeper recession last week as both leading investors and institutional traders remained on the sidelines and did not cover positions even at the attractively lower levels.

The KSE 100-share index maintained its creeping decline and fell by another 265.84 points at 11,695.82 as compared to 11,961 points a week earlier. All leading share, notably MCB, OGDCL, National Bank, PSO, Pakistan Oilfields and Pakistan Petroleum again ended in the minus column amid persistent price erosions.

It was not a single factor but a combination of them, which the market hostage, notable among them was weakness of the rupee, which fell to an all-time low of Rs73 to a US dollar and massive outflow of the capital from the share market to other outlets including gold, which also hit a new high at Rs21,300 per 10 gramme.

Political uncertainty, bad news from FATA and concerns about the economy followed by lack of investor interest in the share business also kept the market under pressure throughout the week.

"The failure of the market stabilisation corrective steps taken last month to put the market back on the rails or to revive investor interest in the share business seems to have further accentuated the situation," analysts said.

It was in this background that a concept of Equity Market Opportunity Fund worth Rs50 billion floated by the Security & Exchange Commission of Pakistan (SECP) to arrest the persistent downward drift on the market and protect the investor interest in case market is manipulated by some speculative traders.

A high-power meeting of all those associated with the share business was held during the last week and financial institutions have sought time to participate in the proposed fund and a final meeting is due to be held on July 16 to finalise the details and the amount to be offered by the participants, market sources said.

The next week, there could be very crucial for the market trend as all steps taken so far including lower and upper circuit breakers failed to produce the desired impact on the market, they added.

Some analysts said what ails the market is the prevailing uncertainty on the political front and until normalcy returns to it not many, not to speak of the foreign investors who are already out, would like to put money in the share business as low daily volume indicates.

Trading, therefore, resumed on an easy note as investors were in no mood to cover positions even at the current attractively lower levels owing partly to the continued weakness of the rupee and an uncertain political outlook.

However, mid-week corrective steps taken by the State Bank of Pakistan to arrest fresh fall in the value of the rupee against the US dollar were welcomed by the stakeholders in the share market as was reflected by revival of selective support at the lower levels on some of the counters.

The improvement both in values and the turnover was attributed the SECP-KSE meeting to review the last months measures and their impact on stock trading and if possible to revise some of them, market sources said.

On the open market, the rupee at one stage hit a new low at 73 and 73.50 for buying and selling respectively as investors seeking safe havens continued to build-up long positions in the dollar, analyst Hasnain Asghar Ali said.

Investors are awaiting the proposed meeting of the KSE on July 16 to review the current changes in upper and lower circuit breakers amid hopes that the previous lower lock of five per cent may be restored to push the turnover figure from the current lows, he added. "Why should investors put money in stocks amid a phenomenon of depreciating value of the rupee, they have other safe havens where their investment is safe and could appreciate," he added.

But analyst Ahsan Mehanti said the increase in the turnover figure at 52 million shares after several lean sessions and an all-time fall in volume figure to 5.348 million shares reflects that a section of investors has already resumed covering purchases on selected counters.

Indications are that the current short-covering at lows could develop into a strong rally any day as the sell-off seems to have overdone its intensity on technical grounds, he said.

Everyone is talking about petrol and the rising crude prices and how difficult it is for the Indian government to do anything. Across the world, it is said that the oil producing nations are unfair by manipulating the supply and demand situation leading to unfair prices.

The fact is all trends related to oil prices have been on the rise. The consumption has been on the rise and the dollar, in which is the oil is priced has been weak for long. With rising consumption and a weak dollar, the price trends were clear. IMF predicts that oil prices are set to remain high and will be a drag on the global economy. The head of a fund management company in the US has gone to the extent of saying that this is the worst financial crisis since the Great Depression. The Goldman Sachs predicts the crude prices to touch $200 a barrel in the next six to 24 months. We are already close to $150. It's no use getting into the blame game and accuse OPEC for not doing enough to keep the prices at a reasonable level. With failure to control consumption as well as not adequately tapping alternate sources of energy, we are caught napping. Indians are now going to pay dearly for successive governments not having a clear long term strategy on oil.

Our nation is one of the worst examples for extremely poor infrastructure related to urban mass transport. The fact is in every city, citizens have to have own private transport, if they have to work or even go to school. This is one of the main reasons for consumption rising steadily, which jumped up 11 per cent last year.
Shortage of power also contributes to consumption of diesel for power generation. In other words, failure of our government to provide adequate mass urban transport and power, has led to increases in consumption of petrol and diesel. Apart from this, we also haven't done enough to tap alternate sources of energy. There are other problems plagued with Indian governance.

Too expensive

Look at the petrol prices across the world, for instance ,to see how our pricing is right at the top. Petrol in India is at $1.32 or Rs 57 per litre which is one of the highest in the world. In China, the price is about $1.01 or Rs 42.7 per litre, after last weeks increase in prices. In Pakistan, petrol is considerably cheaper at $1.06 or Rs 44 per litre. In Dubai, where I live, petrol is $0.37 or Rs 15.50, same as bottled mineral water and Pepsi! However, the cheapest petrol is in Venezuela at $0.05 per litre or Rs 2.10 per litre. One of the major reasons for higher prices in India is tax: customs & excise duties, and other taxes, including state taxes, accounting for half of the selling price. In other words, the ex-refinery price of petrol is actually about Rs 25 per litre and the rest is swallowed by our Government. Depreciation in the value of Rupee against Dollar is also pushing up our oil prices.
Clearly, we need to correct past blunders by taking urgent short term as well as long term measures. We need to control consumption by providing citizens with reliable and comfortable modes of public transport. Private sector should be encouraged to provide transport to employees.

Our congested roads also lead to low fuel efficiencies of automobiles. The long pending Iran-Pakistan-India natural gas project has to be implemented soon as also seriously exploring alternate sources of energy. Lastly, there is no justification for such high dosage of duties and levies on petrol, diesel and LPG. In other words, it's predominantly our government which is at fault for not being proactive about such a serious issue. Hence, it would be wrong to blame the oil producing economies, or the Indian consumers for the present crisis. We can still tide over the crisis, if the government acts by taking the necessary short term as well as long term measures. The oil bomb is ticking and threatens to crash the Indian economy.
Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.