The good news is that $8.4b net capital outflow has occurred during 2008 (as of Sept. 2008) meaning that FIIs have mostly pulled out their 'investments'. The bad news is that still over $20b 'investments' still remain which should also be taken out, thus bringing Sensex to a sensible level of 5000.
The disastrous experiment of treating FII fund-flows as engines of development should be given up, since FIIs are interested in trading in money as a commodity and least concerned about nation's abhyudayam. Instead, the old-fashioned method should be followed of getting specific wealth-generating projects which require imported technology through local entrepreneurs collaborating with MNCs. This is the route PRC took with fast-track implementation of such projects.
The ongoing saga of the fall of the rupee (it has to fall further) is related to the simple fact of inflation and the resultant fall in the purchasing power of the rupee vis-a-vis, say, the dollar. [Exchange rate regime is also manipulated by forward trading in currencies by the same group of 'investment' sharks who indulge in participatory note transactions to complement the looting efforts of anti-nationals. Witness what Soros et al did for the misiere of the Tiger economies during the 1980's.] Inflation is the result of mismanagement of the fiscal regime by the 10-janpath chamcha-s in utter disregard for the welfare of the farmers. (Again, inflation is too much money chasing too few available goods and services which is indicated by the absurd levels of current accounts deficits and loot from the exchequer through government dole-outs).
Remedy? Get the government off the backs of the people. Leave the economy to be managed by the trusted jaati-guild-formations which have proven expertise in generating social capital and stellar individual initiatives which have always been the hall-mark of Indian economic activity without waiting for government largesse or government trying to control commanding heights of the economy.
The remedy has to be preceded by throwing the 10-janpath chamchas doubling up as looters, out of power.
The loot which has been ongoing during the last 4 years shames to insignificance, the loot perpetrated by the British colonial regime. No development project worthy of mention has occurred during the last 4 years. Even the golden quadrilateral was messed up and dumped by the UPA regime which didn't even bother to take up the National Water Grid programme. It was indeed too much to expect from a regime marked by chamcha-giri a nationalist-oriented approach to abhyudayam. As we vote, so we reap. It is time to weep as the rupee continues its southward decline.
kalyan
Rupee value plunges; biggest fall in a decade
16 Sep 2008, 1908 hrs IST,REUTERS
MUMBAI: The rupee posted its biggest fall in a decade on Tuesday, hit by risk aversion and banks arbitraging a weaker offshore rate, although suspected central bank intervention stopped the slide just short of 47 per dollar.
The partially convertible rupee ended at 46.89/90 per dollar, off a trough of 46.99 which was its lowest since July 24, 2006.
The rupee fell 1.8 percent from its close of 46.05/06 on Monday, its biggest fall since May 14, 1998, according to Reuters daya, when the currency fell 2 percent after sanctions were imposed on India for its nuclear testing. One-month offshore non-deliverable forward contracts were quoting at 47.15/25, weaker than the onshore rate, indicating a bearish near-term outlook for the rupee.
That also created an arbitrage opportunity, where the dollar is bought against the rupee in the onshore market and sold in the offshore NDF market to exploit the price differential. "There are no (dollar) sellers in the market apart from the central bank. There is lot of oil, equity and NDF-related dollar demand, and even importers are covering near-term imports," said Madhusudan Somani, associate director of financial markets at Yes Bank.
"The rupee may test 47.20-25 levels in the near term," he added. Dealers said the central bank was seen selling dollars to halt the rupee's sharp decline, but sales were offset by demand for the US currency. At its low on Tuesday, the rupee was down 6.5 percent in September and more than 16 percent in 2008. Dealers estimated the central bank had sold $1.5-$2 billion to put a floor under the rupee on Tuesday.
Indian shares pulled out from a nosedive to end almost level on Tuesday after they had opened down 3.5 percent. Capital outflows from the local shares so far in 2008 total a net $8.4 billion, including $1 billion in September, a sharp turnaround from a record net inflows of $17.4 billion in 2007.
Traders said broad strength in the dollar versus other currencies overseas was also hurting sentiment on the rupee. The dollar steadied near 4-month lows versus the yen on Tuesday, but held gains against high yielders as investors took refuge in safe-haven assets following the collapse of Lehman Brothers.
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