Nifty99000 100%

Sensex99000 100%

Article rating: 5.0
Tags:
Article rating: 5.0
Tags:
Article rating: 5.0
Tags:
Article rating: 5.0
Tags:
Article rating: 3.8
Tags:
Article rating: No rating
Tags:
What's in Store: Does Coronavirus Outbreak bode Ill for markets?
Categories: Exclusive

What's in Store: Does Coronavirus Outbreak bode Ill for markets?

The global supply chain for most products is linked to China, which is the epicenter of the Coronavirus outbreak. This can cause disruption globally with India impacted as well, depending on how long it lasts

Article rating: 4.0
Tags:
A 5-Step Simple Path To Loan Repayment
Categories: Exclusive

A 5-Step Simple Path To Loan Repayment

Today’s generation is all about the so called ‘Swag’ lifestyle, where patience is minimum and hustle-buslte is maximum. This swag lifestyle can make you end up with long credit card bills, heavy interest ridden debt, high EMIs and low or no cash reserves.

Article rating: No rating
Tags:
RBI Pauses On Interest Rate, What’s Next?
Categories: Exclusive

RBI Pauses On Interest Rate, What’s Next?

Central bank is understandably reluctant to cut rates when inflation is breaching its 2-6% mandate, say experts

Article rating: No rating
Tags:
A Few Smart Last-Minute Tax-Saving Investment Options For FY20
Categories: Exclusive

A Few Smart Last-Minute Tax-Saving Investment Options For FY20

Taxpayers should complete all their tax-saving investments well before the financial year deadline to avoid last-minute glitches.

Article rating: 5.0
Tags:
Does New Option Of Lower Tax Slabs Work For You?
Categories: Exclusive

Does New Option Of Lower Tax Slabs Work For You?

Moreover, a tax payer will not be able to claim carry forward, the losses under house property head under the new scheme

Article rating: 5.0
Tags:
Article rating: 4.0
Tags:
Nirmala's big-picture Budget 2020 offers no quick fix for growth
Categories: Exclusive

Nirmala's big-picture Budget 2020 offers no quick fix for growth

Disappointed Markets also reacted negatively on account of non-abolition of LTCG, confusion about DDT removal impact and taxing dividends in hands of recipient

Article rating: 4.5
Tags:
Loans: The Unwanted Guest Costs You More
Categories: Exclusive

Loans: The Unwanted Guest Costs You More

Banks, finance companies always counting on borrowers to make a mistake and pay interest or even late fees

Article rating: 5.0
Tags:
6 Budget Announcements That Impact Your Personal Finance
Categories: Exclusive

6 Budget Announcements That Impact Your Personal Finance

New income-tax rates are optional; dividends to be taxed at your hands; ESOPs get tax relief; timeline to avail loan for affordable housing extended; definition of NRI changed and much more

Article rating: 3.8
Tags:
Article rating: 5.0
Tags:
RSS

News

Is the weak currency good or bad for Indian stocks?

Author: Kumar Shankar Roy/Wednesday, May 16, 2018/Categories: Currency

Is the weak currency good or bad for Indian stocks?

The Indian rupee has been flirting with new lows every other day against the US dollar. Like a hapless plumber fixing a new leak everytime opens a new pipe, the domestic currency has had a shocking run and is trading near 67-68 levels. In fact, the INR has been amongst the worst performing amongst major currencies. A weaker rupee is likely to increase in import costs, albeit with a lagged effect on the Indian economy. On the other hand, IT stocks, pharma firms and a bunch of exporters benefit from a weak rupee. 

The rupee has generally been joined at the hip with the USD dollar index over the years. The weakness in the dollar is a clear reflection of the prospects of the US economy. From a classical economic viewpoint, a weaker rupee means broadly three-four major things. First, a weaker domestic currency can lead to lower aggregate consumption. Second, a weaker rupee drag corporate margins lower. Remember, India Inc.'s margins expanded when commodity prices fell. Third, a weak rupee also lends some upward bias to inflation. We are not talking about just oil, but there is some agri-related impact as well. Fourth, a weak rupee also opens the door for higher fiscal stresses for the government. 

Given the historical correlation of a weak rupee and markets, stock market investors make some obvious trades. They will start preferring exporters like IT and select auto names. The weak rupee's anticipated impact on agri-inflation also compels many investors to look at rural income-linked businesses. Some cut exposure to discretionary businesses, given the margin-related pressures that may emanate. 

The rupee’s movement has not dented domestic markets at all. In fact, India is nonetheless up 5% from recent lows. There has been a perceptible swing in banking related concerns. The near-term stock performance is being driven by earnings feats, as investors focus less on growth.

There is also a feeling in Indian markets that the central bank may do something with interest rates if the rupee continues to depreciate. If the pressure on the currency intensifies, odds for a move in June’s review will rise. Policymakers are likely to monitor the scale of the increase in minimum support prices, updated monsoon forecasts, and oil price direction in the coming months as well.

Coming back to exporters, it is important to have a nuanced view of the weak-rupee effect. The rupee alone will not provide much comfort to the export sector. Definitely, it will be one of the factors and its impact will vary from sector to sector. 

Stock investors must remember that in import-intensive sectors like gems and jewellery, petroleum, electronic hardware or high-end engineering, corporates have a natural hedge. Hence, the rupee depreciation is more or less nullified. But in the traditional sectors like handicraft, carpets, sports goods, marine products, textiles, and footwear, there are gainers. This is because these sectors are less import sensitive.

For Indian investors, the new fiscal has brought with itself a new set of headwinds for the economy. What started off as a reaction to global trade wars, foreign portfolio outflows post Budget, and high trade deficit prints, soon turned into a broad-based weakness led by surging oil prices, fiscal uncertainties, and risks of higher inflation. Now, there is a rupee worry too.

But positioning equity portfolios with the rupee at 67 vs dollar level may be too early right now. Many experts continue to believe that the recent weakness in the rupee is getting amplified by the developments in the global space. Hence, there would be some respite in store in the medium term supporting a retracement of the rupee to a level closer to 66 to the US Dollar by Q2FY19.

Stay light on your feet and invest cautiously.

The author is a business journalist with 13 years of experience

Print Rate this article:
3.0

Number of views (1389)/Comments (0)

rajyashree guha

Kumar Shankar Roy

Other posts by Kumar Shankar Roy
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free