Expert Zone

Straight from the Specialists

The rupee at a crossroads

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The rupee was tossed around quite a bit in the last 10 months. It dropped to a low of nearly 69 to the dollar, creating an economic crisis, before it recovered and is now at 59-60. The threat is not that it may drop once again, but that it may appreciate further and upset the economy in other ways.

Why would the rupee appreciate? Because there are expectations the Narendra Modi government will facilitate development and enable the economy to get back on course. This is what drove the Sensex beyond 25,000. But the currency market was more stable in spite of the huge inflow of $2.2 billion in 10 trading days of May.

That is because the currency market can be better managed with intervention by the Reserve Bank of India. The RBI can purchase excess dollars and build foreign exchange reserves instead of leaving it to the market to price down the dollar and encourage additional imports.

The rupee-dollar exchange rate is critical. A harder rupee makes imports attractive to Indian consumers and exports more expensive for foreign buyers. With the inflation that we had in the last three years, prices of most of our exportable goods have been marked up. To some extent, this has been reversed by the fall in the rupee against the dollar to 59-60 from 45. With the rupee correction, the competitiveness of Indian exports has been restored. Even so, exports have not picked up because the major importing countries have been in a stalemate.

Markets Weekahead: A decisive mandate for equities

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Not even exit polls could have predicted the landslide election victory that ‎has put the BJP’s Narendra Modi in the driver’s seat for India.

The Nifty, after the initial euphoria of a 6 percent upswing, ended Friday at 7203, merely 80 points higher than the previous day. It was a typical “sell on news” phenomenon.

Challenges ahead for Narendra Modi

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Supporters of Hindu nationalist Narendra Modi, prime ministerial candidate for India's main opposition Bharatiya Janata Party (BJP), wear masks depicting Modi outside their party office in MumbaiThe swearing in of Narendra Modi as India’s next prime minister is imminent. Voters have given the BJP an overwhelming majority and the party is all set to form the next government on its own.

Modi, who ran a blistering campaign on the promise of better governance and a crackdown on corruption that had progressively hobbled the Congress-led UPA government, raised huge expectations among a jaded and weary populace.

Debating India’s election cheat sheets

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

As the sun set on the final phase of polling in India on May 12, newsrooms were waiting impatiently for 6.30 p.m. — the deadline set by the Election Commission for airing survey results on post-poll predictions.

Elaborate studio sets packed with guests and news anchors flanked by psephologists armed with data sets were all waiting to declare that Narendra Modi is coming to Delhi.

Markets Weekahead: ‎Time to book profits and not be greedy

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The highlight of the past week was a stupendous 3 percent rally on Friday with the Nifty ending at a record high of 6858. Investors were in a sombre mood earlier in the week, when the market was threatening to break a crucial support level around 6650.

The sudden turn on Friday and the ferocity of the move took most participants by surprise. It was a combination of fresh buying as well as short covering which resulted in a near 200 point rally. It seemed everyone wanted to join the bandwagon due to the fear of missing a bigger rally.

The Modi view on security issues

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

A Sadhu or a Hindu holyman wears a badge with an image of Hindu nationalist Narendra Modi, prime ministerial candidate for India's main opposition Bharatiya Janata Party (BJP), outside an ashram in Ayodhya, Uttar Pradesh May 6, 2014. REUTERS/Anindito MukherjeeResults of the five-week general election will be announced on May 16, with the Bharatiya Janata Party (BJP) led by Narendra Modi favoured to win.

Thus Modi’s views on major security and strategic issues facing India acquire greater salience.

A shortcut to industrial recovery

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

A worker sprays water over piles of coal at Mundra Port Coal Terminal in the western Indian state of GujaratThe rate of growth in infrastructure industries falling to 2.6 percent in FY2013-14 came as a shock. That’s because these industries had been consistently growing at relatively high rates in the previous three years, in spite of the drop in production in other industries.

Infrastructure industries include coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity. Production of natural gas has been shrinking since FY2011-12. Even so, the infrastructure group maintained steady growth between 5 percent and 6 percent. The sharp drop last year was caused by lower growth in the steel and cement industries.

India market weekahead – Partial profit-booking may be prudent before election results

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The so-called “rally of hope” stuttered during the week as Indian markets turned volatile. The Nifty closed at 6695, down 1.30 percent. The fear of the El Nino effect and the IMD forecast of below-normal rainfall seems to have made investors cautious.

With election results two weeks away, investors need to take a stand in the next few days. Although there can be a number of outcomes, only two would be termed positive for the markets – a landslide victory or a comfortable majority to form a stable government. The other scenarios such as a fractured mandate, a third front coalition or a weak UPA or NDA coalition would deflate the sentiment built up till date as the markets have already discounted a favourable outcome.

India’s next foreign policy

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(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

A guest holds the flags of the United States and India and a program in the East Room at the White House in Washington, November 24, 2009.     REUTERS/Jim Young/FilesNext month, India will complete its marathon election. A new government is expected to assume power at the end of May, and, if the polls prove correct, the Bharatiya Janata Party (BJP), which has named Narendra Modi as its prime ministerial candidate, will lead that government.

In defence of the defensives: Why IT, pharma stocks are not pariahs

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Expectation that the ongoing general election will throw up a stable government has spurred a return to risk in domestic equities. The consequent rally has meant those favoured defensives of the sluggish times – information technology and pharma stocks – received a shearing.

The CNX IT index shed 7.8 percent and CNX Pharma 10.1 percent in March – even as the benchmark Nifty surged 6.8 percent.

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