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Monday, October 13, 2008

Rupee dollar equation & market updates

If you were holding the previous dollars which you might have earned during your onsite engagement/earned thru' exports of services and products then the time has come to book the dollars now. One can now start converting those dollars into the Indian currency.

The collective efforts taken by various governments across the globe will have its impact visible in next 6-9 months. It is the same as dollar rupee equation. I wrote about the change in the direction based on the crude prices which were moving north and the impact on the dollar was visible in 2-3 quarters. The mad rush to get dollars so that one can buy crude had its impact on all the currencies worldwide. All the currencies depreciated against dollar. A parallel can be drawn when interest rates in India were increased to control the inflation. This had to impact the liquidity and thus the growth of the economy. The impact took almost 9 months and now we have dismal industrial production numbers. This was surely expected. We can't expect better industrial and manufacturing numbers in next quarter also. The impact of interest rate hike will still be haunting the companies, how? The companies were finding hard to get loan for expansion, or if they had taken the loan then they had to pay higher interest amount in their 'EMIs'. So all the calculation had gone for a toss. Now when the RBI in India and other regulators world-over had reduced the interest rates then a similar impact will be visible in terms of more stability by way of fresh liquidity in the world market. But it will take some time, may be 6-9 months.

As mentioned earlier also, one can go for stagger investments in the market and look for the best value and margin of safety. One can start injecting the money by investing 10-15% of total available money for equity. It is the discount sale which is going on right now. However, on the caution note: one should not have more than 30% of the investible amount in equities and investible amount should be distributed amongst: equity, debt, cash, insurance and real estate.

Niteen S Dharmawat

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.

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