Indian markets may see some weakness in stocks post Fed hike.
Morgan Stanley on Monday raised India's growth forecast for the current financial year to 5.4 per cent from 5.1 per cent projected earlier citing better than expected GDP growth in the September quarter and stabilisation in non-agriculture growth indicators.
The rupee is likely to strengthen to 60-61 level by this fiscal-end on expectations of improvement in current account deficit (CAD) and higher inflows from overseas investors.
Rapid depreciation of the rupee put us in a vicious spiral: D Subbarao
India's current account deficit, which is the excess of foreign exchange outflows over inflows, touched a historic high of 4.8 per cent of GDP in 2012-13, mainly due to rising imports of gold and petroleum products.
We only correct the volatility of the rupee, he said.
Global rating agency Standard and Poor's on Wednesday cautioned that large deficit economies including India could face more economic problems in the near term.
As macroeconomic fundamentals improve, Sensex will make new highs. Here're stocks that can give good returns.
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The depreciation of the rupee, it said, reflects the wider CAD as well as lower net capital inflows.
Finance Minister Nirmala Sitharaman on Monday said the government estimates fiscal deficit of 6.8 per cent of the gross domestic product (GDP) in the next financial year beginning April 1. However, the fiscal deficit in 2020-21 is estimated to soar up to 9.5 per cent due to rise in expenditure on account of the outbreak of COVID-19 and moderation in revenue during this fiscal year.
The move could streamline capital flows and help finance current account deficit
Indians' hunger for gold has made it the second biggest item, after crude oil, in the country's import basket.
Gold prices had touched the all-time high of Rs 32,975 per ten gms on November 27, 2012.
According to a report by financial and business research firm Evalueserve, there will be pressure on the Rupee unless steps are taken to fix certain structural issues like high current account deficit and dwindling investments.
Surrendering most of early gains, the BSE benchmark Sensex was quoting higher by 26 points in the late morning trade on Wednesday on persistent buying, mainly in realty, metal, banking and consumer durable sectors.
Crude oil prices have more than doubled, pushing up India's import bill and raising fears of a higher current account and fiscal deficit. This will impact corporate earnings.
The government is preparing to bite the bullet, with partial decontrol of diesel prices after the Presidential election on July 19.
While Goldman Sachs says India will see a transition, HSBC feels structural imbalances will lead to cloudy outlook for markets.
Amid fast-depleting forex reserves, the Finance Ministry on Wednesday signalled that it was not in favour of selling the dollar to defend any particular level of the rupee. "Let it (rupee) reach whatever levels it has to reach. We can't fritter away reserves on defending some artificial, imaginary rate of exchange," a senior finance ministry official told Business Standard. Forex reserves declined to a near two-year low of $545.65 billion as on September 16, down $85.88 billion from the level that existed on February 25, a day after Russia invaded Ukraine.
Higher food prices can accelerate broader inflation by pushing up wages, while negatively impacting the government finances and reducing monetary policy flexibility, Moody's said in a report.
Meanwhile, Wholesale Prices Inflation (WPI) numbers which were announced on Thursday, accelerated to an eight-month high of 7.0% in October.
The outlook cut is based on a weak premise since the economy is expected to rebound this fiscal but a wake-up call was needed.
If inflows continue, some experts see rupee touching 55 to the dollar, in the near term.
Gold imports in 2011-12 amounted to $56.5 billion and in the current financial year, till December, they are estimated at $38 billion.
In order to check rising current account deficit, the government had raised import duties on the yellow metal to 10 per cent while Reserve Bank of India imposed curbs on import of gold and also laid down various pre-conditions for inward shipments of the precious metal.
The agency has also retained 'stable' outlook for the country's ratings.
Oil and gold had accounted for 45 per cent of India's imports bill in 2012-13.
The prime minister made a reference to orderly exit from unconventional monetary policies in the backdrop of splits between emerging markets and the US.
Mass downgrades of GDP projections make it likely that there will be another wave of FII selling fairly soon
India's foreign reserves continue to march to record highs, touching USD 393 billion early this month backed by strong foreign portfolio and investment flows, according to Development Bank of Singapore.
HDFC has declined by over 7% and is the top Sensex loser.
The International Monetary Fund chief economist-designate Raghuram Rajan feels big deficits -- whether India's fiscal deficit or the United States' current account deficit -- are not sustainable in the long term.
The five policy missteps that have led India to economic crisis.
In a recent note, the global brokerage firm said India now commands a weight of 19 per cent in the above-mentioned portfolio as compared to 18.2 per cent in September 2023. India, it said, is a large liquid market and remains a counter-weight to North Asia if a slowdown in the West occurs and China's recovery disappoints.
The broader markets ended lower with mid-caps and small-caps falling over 1 per cent on the BSE.
Identity of next central bank chief remains a matter of speculation.
PM attributes the rupee decline to widening Current Account Deficit and global factors.
For returning to trend growth of over eight per cent GDP growth and sustained low inflation of four per cent, removal of supply-side constraints and investor-friendly policy reforms are key, says Rajesh Cheruvu, Chief Investment Officer, India, RBS.
Despite the rising prices, the gold demand has grown steadily in the last decade except for the last two years.
The rupee has been on northward-ho since July, after hitting a life-time low of 57.13 mid-June. Since the beginning of the year, the local currency has gained over 7 per cent, and still it is down 18 per cent from its pre-August 2011 highs.
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