Rupee volatility mars investor sentiments
Going by the current trends, rupee volatility continues to impact the Indian market. The Indian Finance Ministry is mulling over steps like further relaxation of external commercial borrowing (ECB) norms for state-owned companies, curbs on import of non-essential goods and encouragement to exports. However, foreign investors continue to be a worried lot, reveals a recent news report published in The Economic Times. ‘They are expecting the current account deficit to hover around 4.5% for this fiscal (FY14), due to the sharp fall in the currency. It may also result into a further slowdown in the exports and rise in import bills’, adds the report.
The value of Rupee reached its record lowest in the first week of August and continues to remain volatile amid concerns about performance of external sector. Currently, RBI’s liquidity restricting measures like sale of government securities or increasing bank rate are overshadowed by untenable trade deficit levels coupled with significant withdrawals of foreign funds by FII. In the short run, value of Rupee against US Dollar is likely to remain close to the current level of 60 and its recovery will primarily depend on focused efforts by the government on boosting exports as well as FII inflows.