In this case, we could see an epic shift from “scarcity” assets into “efficiency” assets,” he added.Īssuming that India runs an ex-oil current account deficit of $50 billion, its forex reserves of over $500 billion mean it is covered for the next decade. “In addition, Indian citizens hold what may be the world’s biggest private sector inventory of gold and silver, which could be switched to productive assets if returns were attractive. “… transactions have started to take place in rupees, which, if continued, could be a game changer for India,” Gave said, adding that the country’s external financing constraint will be greatly reduced if it can buy more oil using Indian rupees.Īlso Read: Russian oil is still powering Europe’s cars with help of India With Russians not able to easily sell oil and gas to Europeans, they have found willing buyers in India. What has changed now is the global energy markets due to the war in Ukraine. “It has been a stop-start policy, with stops dictated by the current account,” he said. Once the current account deficit has shrunk to a tolerable level, the central bank has lowered rates and the upswing has restarted. “As a result, the Reserve Bank of India’s overarching goal has been to prevent a balance-of-payments crisis,” he noted.ĭuring boom times, India’s current account deficit has blown out past 2 percent of GDP, leading the RBI to raise rates in order to engineer a slowdown. He pointed out that India has tended to be permanently on the cusp of a balance-of-payments crisis due to its reliance on energy imports priced in US dollars. India overtakes China in population: What next? This political setup has stopped its government following China’s development approach, which has relied on financial suppression, directing excess savings towards infrastructure and running an undervalued currency by tight management of foreign exchange movements and the capital account,” Gave said. “India is now the world’s most populous nation and the largest democracy. In a recent note titled ‘India And The New World Order’, Gave said the fundamentals influencing inflation, interest rates, exchange rates and economic activity in India are changing in a way that could prove “transformational” for the economy. On the domestic equity market front, the 30-share BSE Sensex advanced 415.49 points or 0.69 per cent to end at 60,224.46, while the broader NSE Nifty rose 117.10 points or 0.67 per cent to 17,711.45.įoreign Institutional Investors (FIIs) were net buyers in the capital market on Friday as they purchased shares worth Rs 246.24 crore, according to exchange data.India’s imports of Russian oil using rupees can set off a virtuous cycle of a stronger domestic currency and lower inflation, which can boost long-duration assets such as growth stocks and real estate, according to Charles Gave, founder of global investment research firm Gavekal Research. Dollar can witness some volatility this week ahead of Fed Chair Powell’s testimony and labour market data from the US later this week, Choudhary added. However, global economic slowdown may cushion the downside. Overall weak tone in crude oil and FII inflows may also support rupee,” Choudhary said. ”We expect the rupee to trade with a slight positive bias on the rise in risk appetite in global markets and a soft dollar. Positive Asian currencies also supported the domestic currency, said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas. The Indian rupee touched a fresh one-month high of 81.62 on extended rally in the domestic markets and fresh foreign inflows. Global oil benchmark Brent crude futures declined 0.77 per cent to USD 81.17 per barrel. The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.06 per cent to 104.58. The rupee appreciated by 5 paise to close at 81.92 (provisional) against the US dollar on Monday, as a positive trend in domestic equities and fresh foreign fund inflows boosted investor sentiments.Īt the interbank foreign exchange market, the local unit opened at 81.85 against the American currency and finally settled at 81.92 (provisional) against the greenback, registering a gain of 5 paise over its previous close of 81.97.ĭuring the trading session, the rupee touched a high of 81.62 and a low of 81.95 against the dollar.
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