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Last week we have discussed on "Corporate Performance" Kindly download details from the following link : http://www.youtube.com/watch?v=mOdJ7180pzE In this issue, we would be discussing on "Journey of The Rupee" Kindly download details from the following link : https://www.youtube.com/watch?v=DsI7vs2XMrM&feature=youtu.be "Knowledge Plus for Wealth + " will give you the overview of the recent happenings in the financial market. Kindly share your valuable feedback at [email protected] to help us serve you better. Thanks
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KNOWLEDGE PLUSFor Wealth …..
VALUE PLUS- The Family Office
FromResearch Desk
Last week at the Financial Markets!!!
• SENSEX rose by 621.57 points (3.31%) and closed to 19395.81 at end of the week
• (FIIs) were net sellers in equity segment leading to net outflow of Rs. 5998.10 Crore
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News Impact• The CCEA announced the prices of
domestically produced natural gas. It should rise to $8.4 per unit, from the current $4.20, in April, 2014.
• It will increase investment within the sector and help to attract investment from outside.
• Domestic production of Gas will increase.• Gas based power production cost will rise
by about 15% - 20%.
• Rupee breached the 60 per dollar mark and reach to its all time high of $ 1 = 60.42.
• Export concentrated company’s will be benefited
• There will be an adverse impact on current account deficit.
• Also this has resulted in an increase in Petrol Prices by Rs 1.80/-.
Last week at the Financial Markets!!!
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Price Performance of Different Asset Class
High volatility seen in all
financial markets
Next Week in the Financial Markets...?
• HSBC India Manufacturing PMI for June 2013 will be released on 1st July, 2013.
• HSBC Service PMI for June 2013 will be released on 3rd July, 2013.
• Monthly Auto and Cement sales numbers for the month of June, 2013 will be released.
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Hot Topic of the Week
Journey of The Rupee
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Journey Begins…
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Source: Wikipedia
In 1947,
• USD INR = 1
• India got Independence.
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Source: Wikipedia
• Continued trade deficit through 1950s, coupled with Government of India’s budget deficit increased magnitude for rupee depreciation in 1960.
• 1 USD= Rs. 4.77
4.77
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Source: Wikipedia
• The Government of India had a budget deficit problem and could not borrow money from abroad or from the private corporate sector due to sector's negative savings rate.
• As a result, Government issued bonds to RBI, which increased the money supply, leading to inflation.
4.77
Knowledge Plus for Wealth +Source: Wikipedia
War with China and Pakistan in 1962 and 1965-66 respectively
• As result of this, defense spending was 24.06% of total expenditure, highest during that period.• One more factor leading to devaluation was the drought of 1965-1966.• US and other countries were friendly towards Pakistan for withdrawal of foreign aid to India.• India faced high inflation and large government budget deficits.
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Source: Wikipedia
In 1990,
• India started having balance of payments problems since 1985, and by the end of 1990, it found itself in serious economic trouble.• The Government was close to default and its foreign exchange reserves had dried up to the point that India could barely finance three weeks worth of imports.• This led to India’s 2nd economic crisis• USD INR = 17.50
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Source: Wikipedia
In 2000,
• From 1995-1998 India faced political instability where 2 Prime Ministers Mr. H.D Deve Gowda & Mr. I. K Gujral stepped down between these years.• Thus India faced higher deficit problem• Rupee had fallen to 45.00 per US dollar
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Source: Wikipedia
In 2007,
• It reached to 10 year high due to foreign investment inflow
• USD INR = 38.43
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Source: Wikipedia
After 2008,
• Foreign investors pulled back their funds due to global financial crisis.
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Source: Wikipedia
In 2013,
• It has reached at highest level of 60.42 per dollar• Currently India’s economic situation is similar to 1970- ‘High Inflation and high trade deficit with fiscal deficit’
Conclusion
• To get the rupee at comfortable position, growth is only option for India.
• It would be necessary to ‘curtail’ the outflow of foreign funds , especially FIIs outflow.
• To come out from current situation, Government has to recognize the lapses / leakages in the system and come up with corrective actions which we call “Reforms”.
• This would then help in re-balancing the other macro factors like current account deficit, inflation etc.
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Research Desk
@VALUE PLUS - The Family Office
Office: (0265 -2324600,6629800)Email: [email protected]: www.valueplusinv.com
