The document discusses the Reserve Bank of India's (RBI) intervention in the forward foreign exchange market to support the falling rupee. [1] RBI began intervening in November 2011 by selling dollars in the forward market, pushing up forward premiums and leading to rupee appreciation. [2] This "Sparos effect" countered speculative demand for dollars and stabilized the currency. [3] However, the interventions withdrew liquidity from the market, making another cut to cash reserve requirements likely in March to offset the impact.
The Indian rupee’s recent roller-coaster ride has impacted virtually every section of society. It has hit the country’s finances, eroded investor confidence, pushed down stock indices, pumped up fuel prices and, in turn, those of essentials.
The rupee’s slide is symptomatic of the concerns about the India story. Months of policy paralysis, political churn and social standoffs have taken their toll. It is in this backdrop that senior journalist Subhomoy Bhattacharjee analyses the prospects of the rupee in the cover story of the August edition of PAR, MSLGROUP India’s public affairs newsletter.
Another senior journalist, Kandula Subramaniam, puts into perspective the power crisis the country is up against and the dilemma state electricity companies are facing.
Additionally, you'll also find an analysis of India's bold food security law as well as an update of important policy announcements and reviews in this issue.
The Indian rupee’s recent roller-coaster ride has impacted virtually every section of society. It has hit the country’s finances, eroded investor confidence, pushed down stock indices, pumped up fuel prices and, in turn, those of essentials.
The rupee’s slide is symptomatic of the concerns about the India story. Months of policy paralysis, political churn and social standoffs have taken their toll. It is in this backdrop that senior journalist Subhomoy Bhattacharjee analyses the prospects of the rupee in the cover story of the August edition of PAR, MSLGROUP India’s public affairs newsletter.
Another senior journalist, Kandula Subramaniam, puts into perspective the power crisis the country is up against and the dilemma state electricity companies are facing.
Additionally, you'll also find an analysis of India's bold food security law as well as an update of important policy announcements and reviews in this issue.
This slide presents the open market operations conducted by central bank of India like what is OMO, who are the players in OMO, why OMO, How OMO, When OMO, Where OMO.
Using The ECM Approach between Growth of the Current Account Balance and Fore...AJHSSR Journal
ABSTRACT: The aim of this research to analyze relationship equilibrium to the long-term and short-term
between the current account balance and foreign exchange reserve. As datum from the world bankstarts from
1982 until 2018, the used methodology Error Correction Model (ECM). The result of the estimate and analysis
were the current account balance and foreign exchange reserve stationary at level with the ADF test. The
variables had relationship equilibrium for the long-term and had one-way causality. That was the foreign
exchange reserve that causesthe current account balance. For the long-term, the current account balance had
positively and not significantly to change the development of the foreign exchange reserves. From the shortterm disequilibrium relationship to the equilibrium relationship, the current account balance had negatively and
not significantly too to change the development of the foreign exchange reserves.The value of the current
account balance of Indonesia has a deficit in some periods. Itwould have a bad impact on domestic foreign
exchange reserves. To the Government, the Ministry of Trade to keep the export performance to the stability of
the current account balance surplus to increase the Indonesian economic growth.
KEYWORDS : Foreign Exchange Reserve, Current Account Balance, EC
Effect of Investor Sentiment on Future Returns in the Nigerian Stock Marketijtsrd
Study investigated the effect of investor sentiment on future returns in the Nigerian stock market for a period covering first quarter of 2008 to fourth quarter of 2015.The OLS regression and granger causality techniques were employed for data analyses. The results showed that (1) investor sentiment has a significant positive effect on stock market returns even after control for fundamentals such as Industrial production index, consumer price index and Treasury bill rate; (2) there is a uni-directional causality that runs from change in investor sentiment (?CCI) to stock market returns (Rm). Derived finding showed that the inclusion of fundamentals increased the explanatory power of investor sentiment from 3.96% to 33.05%, though at both level, investor sentiment (?CCI) has low explanatory power on stock market returns. The study posits existence of a dynamic relationship between investor sentiment and the behaviour of stock future returns in Nigeria such that higher sentiment concurrently leads to higher stock prices. Udoka Bernard Alajekwu* | Cyprian Okey Okoro | Dr. Michael Chukwumee Obialor | Prof. N. S. Ibenta"Effect of Investor Sentiment on Future Returns in the Nigerian Stock Market" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-1 | Issue-5 , August 2017, URL: http://www.ijtsrd.com/papers/ijtsrd2256.pdf http://www.ijtsrd.com/management/marketing-management/2256/effect-of-investor-sentiment-on-future-returns--in-the-nigerian-stock-market/udoka-bernard-alajekwu
India PR Wire May 21, 2009 Foreign Funds Investment Crosses $3 Bn MarkJagannadham Thunuguntla
'Confidence among foreign investors seems to be returning but what is important to note is that there are not many options left for foreign funds to invest,' said SMC Capitals equity head Jagannadham Thunuguntla.
This is a brief outline of the conference call held on 13 December 2010 with Mrs Srividhya Rajesh, Fund Manager, Sundaram Mutual Fund. The article covers Sundaram Mutual Fund views on Economy and Markets
The Indian Rupee stayed in a fairly tight range during the month of September as a number of factors worked in its favour to keep the RBI busy in preventing a runaway appreciation of the currency. Touching 72.85 briefly on 1st September after the shock withdrawal of RBI support for the USD at 74.80 levels through July and August the dollar received support for
the month of September as the RBI continued to add to its foreign exchange reserves
This slide presents the open market operations conducted by central bank of India like what is OMO, who are the players in OMO, why OMO, How OMO, When OMO, Where OMO.
Using The ECM Approach between Growth of the Current Account Balance and Fore...AJHSSR Journal
ABSTRACT: The aim of this research to analyze relationship equilibrium to the long-term and short-term
between the current account balance and foreign exchange reserve. As datum from the world bankstarts from
1982 until 2018, the used methodology Error Correction Model (ECM). The result of the estimate and analysis
were the current account balance and foreign exchange reserve stationary at level with the ADF test. The
variables had relationship equilibrium for the long-term and had one-way causality. That was the foreign
exchange reserve that causesthe current account balance. For the long-term, the current account balance had
positively and not significantly to change the development of the foreign exchange reserves. From the shortterm disequilibrium relationship to the equilibrium relationship, the current account balance had negatively and
not significantly too to change the development of the foreign exchange reserves.The value of the current
account balance of Indonesia has a deficit in some periods. Itwould have a bad impact on domestic foreign
exchange reserves. To the Government, the Ministry of Trade to keep the export performance to the stability of
the current account balance surplus to increase the Indonesian economic growth.
KEYWORDS : Foreign Exchange Reserve, Current Account Balance, EC
Effect of Investor Sentiment on Future Returns in the Nigerian Stock Marketijtsrd
Study investigated the effect of investor sentiment on future returns in the Nigerian stock market for a period covering first quarter of 2008 to fourth quarter of 2015.The OLS regression and granger causality techniques were employed for data analyses. The results showed that (1) investor sentiment has a significant positive effect on stock market returns even after control for fundamentals such as Industrial production index, consumer price index and Treasury bill rate; (2) there is a uni-directional causality that runs from change in investor sentiment (?CCI) to stock market returns (Rm). Derived finding showed that the inclusion of fundamentals increased the explanatory power of investor sentiment from 3.96% to 33.05%, though at both level, investor sentiment (?CCI) has low explanatory power on stock market returns. The study posits existence of a dynamic relationship between investor sentiment and the behaviour of stock future returns in Nigeria such that higher sentiment concurrently leads to higher stock prices. Udoka Bernard Alajekwu* | Cyprian Okey Okoro | Dr. Michael Chukwumee Obialor | Prof. N. S. Ibenta"Effect of Investor Sentiment on Future Returns in the Nigerian Stock Market" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-1 | Issue-5 , August 2017, URL: http://www.ijtsrd.com/papers/ijtsrd2256.pdf http://www.ijtsrd.com/management/marketing-management/2256/effect-of-investor-sentiment-on-future-returns--in-the-nigerian-stock-market/udoka-bernard-alajekwu
India PR Wire May 21, 2009 Foreign Funds Investment Crosses $3 Bn MarkJagannadham Thunuguntla
'Confidence among foreign investors seems to be returning but what is important to note is that there are not many options left for foreign funds to invest,' said SMC Capitals equity head Jagannadham Thunuguntla.
This is a brief outline of the conference call held on 13 December 2010 with Mrs Srividhya Rajesh, Fund Manager, Sundaram Mutual Fund. The article covers Sundaram Mutual Fund views on Economy and Markets
The Indian Rupee stayed in a fairly tight range during the month of September as a number of factors worked in its favour to keep the RBI busy in preventing a runaway appreciation of the currency. Touching 72.85 briefly on 1st September after the shock withdrawal of RBI support for the USD at 74.80 levels through July and August the dollar received support for
the month of September as the RBI continued to add to its foreign exchange reserves
Reducing Rupee - The Great DepreciationKushalShah165
In this article I’ve laid out the timeline and a few top indicators responsible for it and described it in it’s simplest forms for everyone to understand.
Hope you enjoy the read.
The fundamental theme of the newsletter remains the same -- to dive deeper into economic issues that affect our investors. However to keep it interesting, the analysis has been kept at a macro level without getting into minute details.
We received encouraging feedback on the inaugural issue and we have used the same to improve this edition.
We hope you find the newsletter interesting.
Equity View:
Markets are moving into earnings season and initial results of few corporate entities seem good enough,
starting with Indusind Bank followed by Infosys. The numbers of these companies were expected to come
out well thus this outcome is not surprising from sectors like Private Sector Banks, IT, FMCG and Pharma
which are expected to perform well. There are few sectors like Capital Goods, Public Sector Banks and old
Infra Companies which can show subdued results. We expect domestic factors like government policies
to drive the market in absence of global cues. IIP data is set to come out today and is expected to be flat;
Inflation is also expected to be higher due to base effect.
Real estate markets have a cycle of around 5 – 7 years thus an off-take seems distant, however buying
could initiate after 2 – 3 years. A rate cut acts as a catalyst but it cannot help in a sudden pick-up of
demand.
There is always a trend and a counter trend in the movement of an asset class. We need to see the long
term trend. In commodities there is bearish long term trend so counter trend is bullish and thus,
currently we are seeing a counter trend in this asset. Similarly, if we have a bullish long term trend for
equity markets then from time to time there would be correction which is also happening now and this is
known as counter trend. The incremental savings of the government can either be used in the form of an
investment, subsidies or 7th Pay commission arrears. This definitely leads to correction in equity markets
but it doesn’t lead to bearish phase. If everyone is hopeful about the turnaround of Indian story and
economic revival then no one exits completely from the stock markets. Larger expectations are that
investments will certainly pick up and we all are hopeful about it.
News:
DOMESTIC MACRO:
Indirect tax collection rose 35.8% to over Rs. 3.24 lakh crore in the first half of the current fiscal.
Indirect tax collection in the period from April to September in the last fiscal stood at about Rs.
2.38 lakh crore.
The International Monetary Fund (IMF) in its latest World Economic Outlook has lowered India’s
growth forecast for FY16 to 7.3% from its July forecast of 7.5%. Growth is expected to bounce back
to 7.5% in 2016-17 on the back of reforms, pick-up in investments and lower commodity prices.
The Reserve Bank of India (RBI) will be increasing the investment limit for Foreign Portfolio
Investors (FPIs) in Government Securities to Rs. 1,79,500 crore by January 1 from the existing Rs.
1,53,500 crore.
The Cabinet approves a Railway Ministry proposal to pay bonus equivalent to 78 days’ pay, with a wage
ceiling of Rs 3500 a month.
FICCI's "One Year of GST" Survey 2018 finds that most respondents are happy with the implementation of this reform, with 76% respondents stating that GST has a positive impact on their businesses.
Trends & Opportunities for Indian Pharma is a knowledge paper highlighting the upcoming trends and related opportunities in Indian pharmaceuticals industry
For the forthcoming Union Budget, banks demand full tax deduction on the NPA provisioning; reduction in corporate tax rate; and accelerated investments in infrastructure sector
FICCI’s latest Quarterly Survey on Manufacturing suggests slight improvement in the manufacturing sector outlook in the first quarter (April – June 2017-18) of the fiscal as the percentage of respondents reporting higher production in first quarter have increased vis-à-vis previous quarter.
Business Confidence Survey points that market demand has weakened following demonetization and that Union Budget 2017-18 is crucial for stimulating economy
Economists polled expect status quo in forthcoming monetary policy but rate cut likely in first half of FY 2017-18; Union Budget 2017-18 to be expansionary with fiscal stimulus to counter effects of demonetisation
FICCI-IBA conducted the fourth round of Bankers survey for the period July to December 2016, which saw participation by 17 banks representing 52% of the total banking industry (by asset size) and includes public, private as well as foreign banks
The results of FICCI’s latest Business Confidence Survey points towards a sanguine mood among members of India Inc. The Overall Business Confidence Index (OBCI) rose to a six quarter high. The index value stood at 67.3 in the current survey, vis-à-vis 62.8 in the last round.
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Recruiting in the Digital Age: A Social Media Masterclass
CRR Cuts in March 2012
1. CRR CUTS IN MARCH LIKELY
Director
Economics & Research, FICCI
As published in The Financial The news on the Indian economy is not getting better. First, it was the news of sub-7%
Express; February 28, 2011 GDP growth in the current fiscal and now the December IIP numbers coming as another
http://bit.ly/Aya43X shocker. However, what has been really surprising is the dramatic pull-back in rupee
value in January 2012. After touching a low of of 54.23 on December 15, the rupee
touched 48.7 on February 6. While analysts have quickly attributed the recovery in
rupee value to the resurgence in portfolio capital flows (cumulative portfolio flows from
December 2011-February 6, 2012, is now $11billion), we feel that smart move by RBI, of
changing track and intervening in the forward exchange market, did the trick.
First, a little trivia. The demand for the dollar in the forward market always acts as a
leading indicator of an exchange rate crisis. Subsequently, the slide in the rupee value
beginning August 2011 was waiting to happen with the demand for dollars in the
forward market beginning to build up in both the merchant segment and interbank
segment from June 2011 onwards (see table). For example, the excess demand for
dollars in the merchant segment of the forward market crossed $11 billion in September
2011 from $429 million in June 2011, only to decline to $9.5 billion in January 2012 on
the back of RBI currency supportive measures.
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Federation of Indian Chambers of Commerce & Industry [FICCI]
2. How do we explain this excess demand in the forward market? Simply, in an
environment of rupee depreciation, the exporters typically adopt a wait-and-watch
attitude with regard to bringing in export proceeds from abroad. This pushes down the
supply of forward dollars. On the other hand, the forward demand for dollars is
magnified during times of forex market crises in both the merchant and interbank
segment. In the merchant segment, the demand is because of a rush by importers and
the like to cover unhedged positions (excess demand for forward dollars crossed a
staggering $11 billion in September 2011 from a negative $429 million in June 2011). In
the interbank segment, the mad rush is because banks typically go long on forward
dollars with the idea of making profits (from $3.53 billion in June 2011 to $5.7 billion in
September 2011).
Clearly, the speculation by market players under the current circumstances only
hastened the fall in rupee value. This situation has also been aggravated at times by
extraneous factors, like payment for Iran’s oil bill and defense purchases being made
from the domestic markets and perhaps resulting in market players scrambling for
forward cover of their dollar liabilities on the expectation that the demand supply gap
may worsen further.
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Federation of Indian Chambers of Commerce & Industry [FICCI]
3. Now, the masterstroke by RBI. As Exposition 1 shows, RBI smartly changed track and
intervened in the forward foreign exchange market in November 2011 after a gap of 12
months. Even though there is an enormous amount of economic literature on spot
market interventions by central banks, there is little on forward markets. One possible
reason for this could be that the forward market interventions (typically swap
transactions, buy-sell or sell-buy swaps, outright forward purchase/sales) are typically
construed as an example of secret interventions; that there are no official reports of
intervention, even though the central bank indeed intervened.
Interestingly, in the 1950s and early 1960s, there was considerable debate on the
efficacy of the forward exchange market initiated by John Sparos, which is still relevant
today. Going by John Sparos, the best way to fight currency speculation is to
deliberately let the forward premia rise to unreasonable levels and thereby penalise the
currency speculators as their exchange rate expectations about a depreciating domestic
currency are belied. Alternatively, if there is a depreciation of the domestic currency in
the spot and the forward market, then the authorities must sell the foreign currency in
the spot market (that is leaning against the wind), whereas the authorities must
deliberately purchase the foreign currency in the forward market (leaning with the
wind) in order to penalise the speculative players in the forward exchange market. We
call this policy in the forward exchange market the Sparos effect, and it is precisely the
Sparos effect that turned the tide for the rupee. This is how it did it.
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Federation of Indian Chambers of Commerce & Industry [FICCI]
4. Consider Exposition 2. RBI was a net seller to the extent of $1.62 billion in the forward
market in November 2011. We believe a part (possibly significant) of this forward sale
was perhaps a sell-buy swap (selling spot dollars in exchange for domestic rupee
resources and buying them forward). This is because RBI may have avoided outright
forward market purchases, given that the central bank may avoid draw-down of foreign
exchange reserves (faced with the the prospect of a strain on the same by June 2012).
As the figures for November 2011 shows, the gross sale of forward dollars was $1.62
billion during the month. Since there was a significant increase in forward premia
(across all spectrum) in November 2011, it is clear that such a transaction was primarily
a sell-buy swap. Most importantly, such sell-buy swaps worked, as they immediately
pushed up the forward premia in November 2011, leading to rupee appreciation in
subsequent months.
Clearly, the RBI strategy has worked in this case. The advantage of these swaps is that
they merely change the composition of foreign change reserves and hence are another
way of sterilising capital inflows. However, there are disadvantages, too. If the foreign
exchange market is fairly thin, the use of foreign currency swaps for sterilisation only
adds volatility to the forward market. Interestingly, as RBI puts it, forward sell-buy
swaps, even when undertaken on a large scale, do not have lasting impacts in correcting
distortions in forward premia. Also, the cost of swaps, as captured in the accounts of
RBI, has increased with the appreciation of the rupee. In the end, even after
acknowledging the limitations of swap transactions, they have worked, with portfolio
and export proceeds picking up enough steam post November 2011 (see exposition 2).
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Federation of Indian Chambers of Commerce & Industry [FICCI]
5. This, perhaps, has been the most significant gain in 2012! However, a word of caution.
Any sell-buy swap when it unwinds will be followed by forward transactions to
neutralise the former (in December 2011, the official data shows that there were $250
million forward purchases), and subsequently, there may be an increase in the volatility
in rupee. As Exposition 3 suggests, the volatility in the rupee value, which declined
significantly from end-Dec ember 2011 has started to increase again, that portends bad
for the market.
Finally, as the data suggests, there has been a liquidity withdrawal of nearly R55,000
crore during November-December 2011, because of foreign exchange market
interventions. This perhaps sets the perfect recipe for another round of CRR cuts in
March 2012, to offset such a negative impact.
Views personal
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Federation of Indian Chambers of Commerce & Industry [FICCI]