Tuesday, December 06, 2011

>Indian rupee(INR)analysis

In recent times we saw 2008 financial crisis and the present eurozone credit crisis.
India also saw 2 major financial crises which led to 2 subsequent INR devaluation.

Foreign currency reserves are very critical aspect of any country's ability to engage in commerce
with other countries.
Usually the larger the foreign currency reserves the better the country is placed to fight
any financial crisis.India saw two major financial crises in year 1966 and 1991


As a developing economy, it is to be expected that India would import more than it exports. Despite government attempts to obtain a positive trade balance, India has had consistent balance of payment deficits since the 1950s. The 1966 devaluation was the result of the first major financial crisis the government faced.

6 June, 1966: Rupee is devalued, Rs 4.76 = $1, after devaluation, Rs 7.50 = $1 (57.5%)


In 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. At the end of 1990, the Government of India found itself in serious economic trouble. The government was close to default and its foreign exchange reserves had dried up to the point that India could barely finance three weeks’ worth of imports. In July of 1991 the Indian government devalued the rupee by between 18 and 19 percent.

March 1993: Unified exchange rate: $1 = Rs 31.37

We recently saw a all time low of$1= Rs 52.73 nov(22) 2011

USDINR monthly chart suggests their could be some consolidation between 54 to 48 levels
before going towards 58-60 .How its gonna effect economy need to be seen.

In 2008 nifty had fallen 51.8% (6136-2959)closing basis USDINR had rocketed to 52.50 by march 2009.

In 2011 we have fallen 17.9% (6177-5039) closing basis USDINR already touched a all time
high of 52.73
Testing time for economy ahead .



Ankur said...

What exactly is the correlation between the drop in the nifty and exchange rate?
Exchange rate is a function of interest rates, fiscal balances and monetary control. While I agree that these factors affect the broader capital markets, but not to the same extent as they affect exchange rates. In fact exchange rates are highly driven by very efficient supply demand mechanics.
I'm unable to gauge the extent of correlation between the nifty and the exchange rates.

Anonymous said...

I concur with what Ankur said, There is no correlation between forex rates and stock exchange movements.

However, you can pinpoint select few stocks whose future depends on forex rates (viz, the companies with maturing FCCB e.g. Suzlon or some real estate firms) or export firms which will gain from these changes.

Rish said...

Yes there is no direct corelation to forex and y stock market but history has shown weaker inr is bad for economy.

Rish said...

usdinr max 54 and then expect profit booking

yagnesh said...

Weaker INR makes india a good destination for investment for FII. Consider Reliance at 1100 Rs when USD was 46 Rs/USD that made it 23.9 USD/Share

and now at 750 Rs when USD is at 54Rs/USD it makes it 13.88USD/share.

All in all there have to be confidence that will bring money. So wait for the confidence to build

Anonymous said...

well exchange rate in todays world is not connected to interest rates and monetary fiscal thing....

in todays world it is like a loose cannon and cross currency loans ....which is out of control so watch out if u think worst case for rupee or euro or yen is over people havent seen anything

Anonymous said...

what software gives USDINR charts like bar/line/candle and also like KST,MACD etc...

Thanks in advance

Rish said...

USDINR from 54+ to as of now 51.60

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