If we are able to get our act together, we may be able to see growth climb again to more than eight per cent, says Jamal Mecklai.
Corporate India may be sitting on a $3 billion to $5 billion (Rs 12,000 crore - Rs 20,000 crore) notional loss on its exposure to foreign exchange derivatives. When the price of the underlying asset (derivatives in this case) depreciates, companies that have invested in these derivatives have to account for the loss in their books. This process is called marking to market.
Low volatility, in general, means low risk, which highlights another anomaly -- when any asset gets into uncharted territory, risk, almost by definition, should be high.
Undaunted by what non-ideal mortals call pragmatic reality, he rolled up his sleeves on his first day in office and rolled out a series of measures that turned sentiment, as if on a dime.
Budget 2010 went far beyond most recent Budgets in that it defined an entirely new paradigm for the Indian economy.
Budget 2010 went far beyond most recent Budgets in that it defined an entirely new paradigm for the Indian economy.
Housing is a highly illiquid and, by definition, high-risk market, and individuals, in general, do not have the skills to manage this risk.
The yen is its own animal, with unique behaviour patterns, reflecting the uniquely magical nature of Japan.
Indeed, the average volatility of the rupee since January (10.6 per cent, up substantially from 6.8 per cent in 2011) has been higher than that of the euro (9.5 per cent, down quite a bit from 11.4 per cent in 2011) -- the first time this has happened in at least 10 years.
RBI and Sebi should modify the structure of the currency futures market to permit settlement by delivery of dollars ONLY from an EEFC account, says Jamal Mecklai.
New-age genetic research and technology brings new life to an old economy industry, one that is amongst the largest employers in the country.
The continuing efforts of Indian exchanges at user education need to be given a different focus.
RBI kept on adding non-SDR currencies over the next couple of years till they reached about 7.5% of reserves, which is the level they continue to hold.
Perhaps these new revelations about E&Y and Lehman will inspire the govt to reopen the subject for more radical change.
Banks are being squeezed every which way -- on capital, on compensation, on credibility. Jobs in financial services will become scarcer and will pay less.
During 2013 and 2014, we will see both 65 and 50 to the dollar.
Tech companies and exporters are losing profits as the currency continues to rise.
Writer Jamal Mecklai muses about the state of mind of the RBI governor, post the credit policy. He gets into the mind of the governor and tries to guage his thoughts and reactions. Against all anticipation, the governor did not bow down to political pressure and the RBI rates were not hiked. He did a fine balancing acting between the two volatile factors -- market and the govt. He leaves the task of choosing between sub 5% inflation rate and 10+% growth rate to his successor.
It does feel like we are close to the end of the rupee's rally, says Jamal Mecklai.
Given the stability of the rupee over the last 10 months, many companies have been tempted not to hedge their foreign currency risk.
Going by the real effective exchange rate, the rupee is overvalued
Analysts say the sell-off in risky assets will be temporary and could be a buying opportunity for long-term investors.
Since most Indian firms have kept their forex exposure unhedged, credit profile of companies in the highly sensitive sectors such as oil & gas, metal & mining, airlines could weaken substantially, says Anup Roy.
RBI on Monday conducted an unprecedented level of liquidity infusion to the tune of Rs 3.3 lakh crore, in which banks bid for as much as Rs 4.5 lakh crore. The central bank said it would conduct a liquidity infusion auction of Rs 1 lakh crore on Tuesday as well, to help banks tide over the liquidity crisis.
While the US is definitely recovering, Europe, Japan and, now, China are all going through another wave of what some fear could be a multi-year slowdown.
RBI's intervention in the currency market is through public sector banks.
The good news for us is that India's economy - and sentiment about it - is much better than it was a year ago, says Jamal Mecklai.
It is important to understand that debt investors are a conservative lot and, in general, most such investments are hedged out of foreign exchange risk to simply earn an arbitrage profit, rather than carry the risk to possibly increase their yield.
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While there are no definitive statistics available, the Tirupati Trust Foundation has well over 1,000 tonnes of gold.
RBI is unlikely to stem the slide against the dollar as the greenback is rising rapidly against all currencies in the world.
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