Straight from the Specialists
(The views expressed in this column are the author’s own and do not represent those of Reuters)
It was a topsy-turvy week for markets as the benchmark indices hovered between positive and negative territory to finally end with a loss of 0.7 percent. A lacklustre budget initially triggered the weakness followed by a spate of negative events resulting in a fifth consecutive week of decline for the markets. The newly appointed railway minister’s move to roll back fares also unnerved investors.
A leaked draft report of the Comptroller and Auditor General (CAG) revealed that between 2004 and 2009, the government gave away 155 coal acreages to private and public companies without a proper auctioning process. It is estimated that due to this, the government exchequer lost about $210 bln. The CAG later quashed reports of losses from the government’s coal block allocations policy. However, the already dwindling faith of investors in the current government got another jolt in the wake of numerous other scams that rocked the nation in the past.
The rupee weakened against the dollar beyond 51.30 as confidence in the global economy deteriorated again following weaker-than-expected Chinese and euro zone data. Weakness in equity markets and a strong dollar demand from oil importers kept the currency weak. With risk appetite on the weaker side due to doubts over capital inflows, the rupee is likely to remain under pressure, undermined by high oil prices. The global economic outlook will remain an important market focus. Any further evidence of deterioration in the Chinese and the euro zone outlook would result in a defensive stance on risk appetite with a shift into instruments such as the yen and dollar.