Their investment of $7.7 billion till date this year has strengthened the rupee further
The robust appreciation of the rupee against the dollar by over 11 per cent — from a historic low of Rs 68.84 last August to around Rs 61 today — is a good development. It started with the measures taken by RBI governor Raghuram Rajan in September to attract NRI funds. His measures created confidence in investors. This situation was boosted by FII inflows on the growing perception of Gujarat Chief Minister Narendra Modi leading the BJP to victory in the Lok Sabha polls. Each time a new poll showed the BJP increasing its tally, the markets would touch a new high.
Their investment of $7.7 billion till date this year has strengthened the rupee further. Analysts see the rupee appreciating by another five to six per cent by the time the new government is installed.
Whilst a strong rupee is a good development, it has to be watched with great caution. Much of this strength, both in the rupee and the stock markets, is on the perception that there will be a Modi-led government after the polls. What if Mr Modi is not made Prime Minister and India gives a fractured verdict? The situation could be short of catastrophic for the markets and the rupee. Union finance minister P. Chidambaram has already expressed concern about the volatility in rupee movement so there is a possibility that the RBI will put in place measures that could mitigate the weakening of the rupee if the scripted scenario of the FIIs goes haywire.
( Source : dc )
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