On a day the BSE Sensex fell 0.29 percent to close at 26,908.82, and the Nifty ended 0.31 percent at 8,102.10, the Rupee rose!!!! So foreign institutional investors were selling Indian scrips. Yet, the rupee ended at 63.17/18 to the dollar on Wednesday whereas Tuesday's close was 63.57/58. How could that be? One argument is that the FIIS bought bonds expecting RBI to cut interest rates. That the RBI is promising to reduce rates is already long known. How could this rush be to buy debt? And that too emerging market debt?
It is highly unlikely that FIIs will remain in emerging market assets in parts (as suggested here in the debt market) so willingly in the current global scenario. The other more plausible logic appears to be a RBI market ploy offloading dollars through its friends the State Bank of India (SBI) & large nationalized banks so that the FIIs find it costly to exit. These are exit barriers raised. Otherwise there is no logic for the Rupee to appreciate on a day emerging currencies are under pressure ( triggered by falling Euro and oil) . This action of the Central bank may be a costly exercise as contrarian moves do not lost in a trending market. There is nothing in the Indian market right now for the rupee to strengthen. The market should take the Rupee down soon if it is just fundamentals.
Views expressed without risk or responsibility.
It is highly unlikely that FIIs will remain in emerging market assets in parts (as suggested here in the debt market) so willingly in the current global scenario. The other more plausible logic appears to be a RBI market ploy offloading dollars through its friends the State Bank of India (SBI) & large nationalized banks so that the FIIs find it costly to exit. These are exit barriers raised. Otherwise there is no logic for the Rupee to appreciate on a day emerging currencies are under pressure ( triggered by falling Euro and oil) . This action of the Central bank may be a costly exercise as contrarian moves do not lost in a trending market. There is nothing in the Indian market right now for the rupee to strengthen. The market should take the Rupee down soon if it is just fundamentals.
Views expressed without risk or responsibility.
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