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Depreciation of Rupee in the past 2 Months
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Depreciation of Rupee in the past 2 Months

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A detailed report on depreciation of Rupee for the past 2 months.

A detailed report on depreciation of Rupee for the past 2 months.

Published in Economy & Finance , Business
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  • 1. Depreciation of Rupee in Past Two Months
  • 2. Before we continue…  Repo Rate : The rate at which the RBI lends money to commercial banks is called repo rate.  Reverse Repo rate : The rate at which the RBI borrows money from commercial banks.  Cash Reserve Ratio (CRR) : The amount of funds that the banks have to keep with the RBI.  FII : Foreign Institutional Investor, An investor or investment fund that is from or registered in a country outside of India.
  • 3. How is Currency valued? When the demand is greater than supply, the value of the currency increases and vice-versa.
  • 4. USD v/s IN Rupee
  • 5. Depreciation Of Rupee  More and more rupees are brought in our country and dollars are sold  More and more rupees are sold and dollars are brought
  • 6.  The Indian National Rupee (INR) has depreciated 15% in the past two months.  INR touched an all time high of 64.11 against US Dollar on August 08,2013.  The depreciation of Rupee has severely damaged the quality of Asset classes Stocks or equities Fixed Income or bonds Money market or cash equivalents Real estate or other tangible assets
  • 7. Advantages of Rupee depreciation to Indian Economy  Beneficial to the Exporters  Good News for NRIs  Benefits to the IT sector  Benefits to Investors invested in International Funds  Benefits to the Hotel Industry
  • 8. Disadvantages of Rupee depreciation to Indian Economy  Impact on inflation & fiscal deficit.  A blow to Indian importers.  Exporters face difficulty in securing new orders.  Negative impact on FII flows to Indian market.  Negative impact on Indian students and travellers abroad
  • 9. Reasons for Depreciation of Rupee for the past 2 months  FII outflow touches record high USD 7 Billion in June,2013  FII’s offload USD 3 Billion worth equities in July,2013.  RBI kept interest rates unchanged.  Increase in Crude prices.  Increase in Fiscal Deficit of India.  Unchanged Interest Rates BY RBI.  USA initiated process of slowing down Bond Buying programme.  Strengthening of US Dollar against major world currencies  Lucrative opportunities in other countries.
  • 10. FII Outflow
  • 11. Unchanged Interest Rates  RBI kept its interest rates unchanged in its ‘Monetary Review’ on June 17 and July 30.  Keeps repo rate unchanged at 7.25 percent.  Reverse repo rate stays at 6.25 percent.  Cash reserve ratio unchanged at 4.00 percent.
  • 12. Effect of Unchanged Rates.
  • 13. Quantitative Easing  Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective.  US Federal Reserve announced Tapering QE on June 19,which started a ‘Fire sale’ in the world currency market, currencies of major countries started depreciating including India’s Rupee.  With the news of QE tapering Fii’s started offfloading their investments across Asian markets.
  • 14. USD v/s IN Rupee
  • 15. Impact of depreciation of Rupee on IB  Exporters are the biggest beneficiaries  NRIs become richer  Tourism industry will flourish as the holidays in India will get cheaper.  Imports will become expensive •Oil prices will increase •Rise in inflation •Poor returns on FII’s •Difficulty in repayment of loans •Foreign education will get expensive •Foreign holidays will get expensive
  • 16. Impact on Economy  ↑Imports  ↑Inflation  ↑Interest Rates  ↓Fixed Income  ↓ Growth  ↓Jobs
  • 17. Steps taken by RBI to curb Rupee Volatility.  RBI increases restrictions on gold import by Canceling Margin Funding to import gold. The Govt. increased import duty on gold import to 8 % from 6 %.  RBI creates Demand for rupee by sucking excess rupee liquidity.  The apex bank restricted the limit of individual bank borrowing to 0.50 percent of its total deposits (or net demand and time liability).  RBI increased the daily average requirement of CRR from 70 percent to 99 percent.  The RBI will conduct sale of Government of India Securities to suck up Rs. 12,000 crore.
  • 18. Bibliography  www.moneycontrol.com  www.moneylife.in  www.cnbc.com  profit.ndtv.com  www.hindustantimes.com  investing.money.msn.com  www.rbi.org.in