Do it yourself

Since the beginning of the year 2025, the exchange rate of India Rupee (INR) has fallen against the currencies of most of our major partners. Though, USDINR (INR vs USD) is the most keenly watched exchange rate (since a majority of our forex reserves, external debt and external trades are USD denominated), INR has depreciated most against EURO (EUR). The extent of depreciation against Japanese Yen (JPY), Chinese Yuan and British Pound (GBP) is mostly similar.  ​ ​ Notwithstanding the views of the finance minister that “INR is not weakening, but the other currencies are appreciating”, the INR depreciation is a matter of concern to a large majority of Indian investors. Since we are traditionally a current account negative economy, on the net basis, INR depreciation adversely affects the economic fundamentals. Besides, eroding the confidence in the economy, — ·          INR depreciation makes many things expensive for the Indian households...

In the past two weeks, three key economic events took place in India. These events aim to provide material fiscal and monetary stimulus to the economy. ·          First, on top of the 50bps cash reserve ratio (CRR) cut in December 2024, the Reserve Bank of India (RBI) announced further infusion of ~Rs1.5 trillion of sustainable liquidity in the banking system. ·          Second, the finance minister Rs one trillion personal income tax concessions, benefitting over 20 million taxpayers. ·          Third, RBI embarked on a rate cut cycle after a long 24 month pause, with a 25bps cut in the policy repo rate. Besides, the RBI also decided to defer the implementation of stringent Liquidity Coverage Ratio (LCR) and project financing norms, which would materially constrict the lending ability of the banks, to at least the end of FY26. In normal circumstances, this com...

For many weeks, global markets have been behaving in a very desynchronized manner. Non-congruence is conspicuous even in the behavior of the same investor/trader operating in different market segments, e.g., equities, bonds, commodities, currencies, cryptocurrencies, etc. For example, until a month ago an investor with a balanced 50:50 debt-equity asset allocation invested in bonds as if a soft landing was imminent leading to a series of policy rate cuts over the 12-15 months. The same investor invested in equities believing that earnings growth would surpass the estimates and stocks of top technology companies would continue with their dream run. The investor was content investing in USD assets assuming green greenback would strengthen and at the same time he was buying bitcoins expecting the demise of the extant monetary system by independent crypto or digital currencies. Last week in the US, equities reached their all-time high levels as if all is well in political, geopolitical, cl...

The Reserve Bank of India constituted an Inter Departmental Group (IDG) in December 2021 “To examine issues related to Internationalisation of INR and suggest a way forward”. The Group submitted its   recommendations   in October 2022; and the same have been made public last week. The following are some of the highlights of the IDG recommendations. Terms of References The terms of reference of the IDG were as follows - ·           To review the extant framework for use of INR for current and capital account transactions and assess their current levels; ·           To review the extant position of use of INR for transactions between non-residents and the role of off-shore markets in this regard; ·           To propose measures, consistent with the desirable degree of capital account liberalization, to generate incentives for use of INR for trade...

This summer Americans drove less than the summer of 2020 when many office goers were working from home and the economy was partially shut down. The situation is no better in Europe. Higher fuel and food cost is driving the cost of living higher in most of the world, significantly disturbing the household budgets.   Many emerging and underdeveloped markets were struggling with higher inflation even before the pandemic. But pandemic and adverse weather conditions in the past two and half years have made the situation worse. Whereas many emerging markets, especially in Africa and Latin America, have been struggling with higher inflation and rise in the cost of living for a couple of decades, it is a relatively new phenomenon for the post 1980s developed western economies. The present generation in these economies had gotten used to cheap and easily available money and marginal food and fuel inflation in the past two decades. For them this sudden and sharp rise in basic cost of l...

 One good thing about the Monsoon season in North India is that this is the season for new crops of fruits from hill states. We get fresh and juicy pears, plums, apples, cherries, peaches etc.; besides, juicier varieties of mangoes like Chausa and Langda. A visit to the fruit market in Gurgaon yesterday however left a little sour taste in my mouth. None of the seasonal fruit was selling at less than Rs100kg. Apples are more than Rs200/kg. Even mangoes are selling at a rate of Rs120-250/kg. The vendors selling from carts and smaller shops are unhappy as sales are down notably due to higher prices; and a larger than usual quantity of their merchandise is going to waste due to rotting. The consumer is obviously unhappy as even the seasonal fruits are becoming unaffordable for many of them. The importers of fruits from South East Asia and Americas are also not particularly happy as the demand for expensive and exotic fruits is diminishing consistently due to higher prices. I shall ma...

 On 29 th June 2022, Reuters reported a trade deal that could have material and far reaching implications for India’s external trade in particular and the global trade in general as well. As per the agency, it has accessed documents from the Indian Custom department showing that Ultratech, the largest cement manufacturer in India, has imported 1,57,000 tonnes of coal, worth USD25.81million (appx INR2000cr), from Russia. The consignment is invoiced in Chinese currency Yuan (CNY), implying that the payment will be made in CNY, without using the global payment network like SWIFT. The agency also reported that other companies have also placed orders for Russian coal using CNY payments. ( see here ) This could be the first instance of an Indian company using CNY to make international payments. Apparently, this time the transaction could be to circumvent the international sanctions on Russia. Ultratech would be using USD to buy CNY in China or Hong Kong to pay the Russian coal produce...

market participants; while gold has also given decent return. Greed begins to overwhelm fears Despite a spate of terrible economic, political and geopolitical events, the greed has started to overwhelm the fears since the market made a panic bottom in March 2020. The midcap stocks have outperformed the benchmark indices, and the small caps have also started to catch up recently. (i)     The benchmark Nifty is negative ~15% YTD (22 June 2020), whereas Midcap are down (-13%). Small cap index is down by 20%. (ii)    Overall market breadth has turned marginally positive for the YTD. (iii)   Foreign investors turned big sellers again after remaining net buyers in 2019. Domestic mutual funds bought more than the FPI selling. Net institutional flows have been thus positive YTD. However, in recent funds the net new flows into the equity mutual funds have slowed down. (iv)    Pharma is the only sector that has retur...