India Insight

Rupee spoils holidays abroad for Indians, but not for all

With the rupee hovering near a record low, Indian tourists would be tempted to give foreign shores a miss this year. But staying home is not an option for Harsh Chadha, a multinational executive just back from a three-week family vacation in the UK.

Chadha, 35, is part of India’s growing elite, whose trips abroad are not affected by the vagaries of the currency market.

“[If I’m planning] a trip to a place like London [and] already spending enough money … a 10-15 percent increase in the dollar will not be pinching me a lot,” says Chadha, an IT director who bought pounds for 92 rupees ($1.5) each before going on vacation.

The Indian rupee has fallen around 10 percent since March and reached a low of 61 to the dollar in June, hurt by the U.S. Federal Reserve’s plans to taper stimulus measures and India’s ballooning import bill.

And it’s not just the dollar. The rupee hit 93 to the pound, compared to about 80 in March, while the euro jumped to 78 rupees from 70 in recent months.

Tracking Sensex: top gainers, losers in June quarter

By Aditya Kalra and Ankush Arora

Indian shares ended the June quarter on a positive note as the Sensex and Nifty registered gains of around 3 percent during the period, data showed.

The markets managed to post gains in the quarter despite falling around 2 percent in June after the U.S. Fed said it plans to begin winding down its stimulus later this year if economic conditions are favourable.

In positive developments, monsoon rains arrived on time and covered the whole country two weeks ahead of schedule while inflation slipped below 5 percent. Sentiment was also boosted when rating agency Fitch revised its outlook on India back to “stable” from “negative”.

Tracking Sensex: Top losers, gainers of the week

Indian shares ended in the green in three of five trading sessions but jittery market reaction to the U.S. Federal Reserve’s announcement of a gradual end to its $85 billion bond-buying stimulus took the BSE Sensex down 2.1 percent for the week. The broader 50-share Nifty lost 2.4 percent.

The U.S. central bank’s monetary programme has been a source of easy money for emerging markets such as India that used FII inflows to finance its current account deficit. The possibility of a liquidity drought and a consequent selloff by foreign investors spooked the markets with the rupee plummeting to a record low of 59.98 against the dollar on Thursday.

China factory activity, which shrunk to a nine-month low, also alarmed Asian markets this week.

Markets struggle: At least 100 stocks hit 52-week low on NSE

Indian markets struggled in trade on Thursday with the Sensex falling more than 200 points while the Nifty sank over 50 points. Weak Asian markets also weighed as the Nikkei slumped more than 800 points on worries the U.S. Fed would trim its stimulus programme in the coming months.

The rupee also remained weak, trading below 58 versus the dollar, as Finance Minister P. Chidambaram did not announce any concrete steps to arrest its fall.

At least 100 stocks had touched their 52-week low on the National Stock Exchange (NSE) during trade, data showed. Here’s a look at some stocks that hit a one-year low during Thursday’s trade:

India ponders deficit control after the gold rush

India’s central government in January raised the tax on refined gold imports by 50 percent. This increase to 6 percent from 4 percent is the second rise this fiscal year. Why does it keep making gold more expensive, particularly as the nation enters its prime wedding season when brides will be bedecked with the metal from head to toe?

That’s part of the problem — a large part. India’s cultural attachment to gold is something that anybody who has been to an Indian wedding could tell you about. For those of you who haven’t, consider this report from CBS’s “60 Minutes” TV news program:

“India’s love for gold is almost a religion. Beyond being a symbol of wealth and status, gold is part of worship and culture – a tradition that goes back thousands of years. From birth to death, for men and women, among rich and poor – acquiring gold is a goal for the people of India. All of which has made India the world’s largest consumer of gold and thus a powerhouse in industry … Just as part of the American dream is to own a home, the dream in India is to own gold. For Indians, gold jewelry is wearable wealth, financial security that’s also a fashion statement.”

The rupee’s fall from grace

Indian milk and dairy products producer Amul’s campaign has a new subject — the rupee.

The newspaper advertisement features the iconic Amul girl, in her polka dotted red dress, in a boat made of the rupee, about to sink in turbulent waters. She says ‘mujhe mere rupee se bachaao!’ in Hindi. Loosely translated into English, it would mean ‘save me from my rupee.’

The tagline, tongue in cheek, says ‘valued highly’.

The Amul mascot’s angst today reflects that of investors who have so far been bullish on the India growth story.

As the economy and markets struggle, India needs tough actions

Slowing growth, a falling rupee, sliding stock markets, a rising current account deficit, drying foreign inflows and policy paralysis at the centre. Things certainly don’t look rosy for India.

With the rupee down 22 percent in the last 10 months and a 6 percent drop in stock markets so far in May (as of Friday’s close), is it time for the government to seriously rethink its strategy ahead of the 2014 general elections?

From Mark Mobius, who said the Indian government has been making many big policy mistakes, to Lakshmi Mittal, who told The Times of India on Friday that decision-making is too slow and India needs to move the way the rest of the world does — there is no dearth of criticism.

Are frequent elections a waste of time and money?

The general elections in India, due shortly, may not throw up a clear winner.

This could mean weeks or even months of political uncertainty as parties negotiate for power.

Of the past six prime ministers, only three could complete their term.

In this context, the idea for a fixed term for parliament or the government may be floated again.

Indeed, the Chief Election Commissioner recently suggested a fixed term of five years for the government to cope with the increased frequency of elections, which hinders governance.

Whose poor is poor?

“To define is to limit,” wrote T.S. Eliot.

Indeed sometimes, to limit things, they just may have been defined in a particular manner.

This struck home when I saw a communication by the World Bank on poverty estimates.

The World Bank produced an update of poverty numbers for the developing world based on an international price survey conducted in 2005.

Me panic? I’m not panicking! Who is panicking?

Would someone please remind folks that it’s Friday and we all deserve a relaxing weekend? I for one will be doing my usual Saturday morning Yoga. But it’s nasty out there – the contagion has spread, and panic is now the correct adjective.

The overnight Dow crash hit Asia hard – the Sensex is down at least 9 percent and looks like it’s headed for a holiday south of 10,000, the rupee has hit an all time low and in Japan the Nikkei tumbled another 10 percent. Looks like that decision to let Lehman go bust set off the mother of all chain reactions…and Indian markets may be headed back to 2006 levels.

Here’s our resident technical analyst Phil Smith:

sensex.gif…As the chart shows the SENSEX has broken through some very strong and very important support points in the past couple of weeks. These are clearly showed on the chart with the support at 11,900 to 12,500 being broken effortlessly. The next major support levels for this market now stand at around 9,700 as marked and coincides with the old support levels reached back in 2006 when the market staged its dramatic correction then. Currently all the technical indicators are bearish as they have been since the middle of September