BUDGET 2000
SPECIALS
INTERVIEWS
COMMENTARY
GOVT&ECONOMY
Y2K: BIZ FEATURES
INDIA & THE WTO
CREDIT POLICY
BIZ IN THE USA
CARS & MOBIKES
MANAGEMENT
CASE STUDY
BIZ-QUIZ
USEFUL INFO
ARCHIVES
NEWSLINKS
SEARCH REDIFF

Search Rediff

India rupee's fall unlikely to worry foreign funds

A fall beyond that, however, could be a matter of concern, they said.

The rupee dropped to an all-time low of 44.75 per dollar losing 1.74 per cent since Monday's close -- an unusually large fall for the currency which is convertible only on the current account.

But it recovered to 44.05/10 at close when the central bank announced measures to curb the volatility.

The Reserve Bank of India warned against speculative trading but said it did not target any particular level for the rupee.

"This kind of fall in the rupee does not really matter. All funds when they invest in India, factor in a 6-8 per cent depreciation per annum...that has been the trend on an average since liberalisation," U R Bhat, chief investment officer at Jardine Fleming India Asset Management, told Reuters.

With Thursday's fall to 44.75 to the dollar, the rupee has lost 2.79 per cent since the start of the year -- an annualised depreciation of 6.99 per cent.

"I see the rupee reaching 45.50 by March 2001, if it goes beyond that, it will be a matter for concern," said Vasudeo Joshi, head of research at HSBC Securities.

Forex dealers had cited dollar buying by foreign funds to repatriate funds after selling in the equity markets as part of the reason for the rupee's weakening.

The Indian stock market has been on a downward slide over the past three months and at Thursday's close of 3,999.03, the benchmark Bombay exchange index has lost 35 per cent from the peak of 6,150.69 on February 14.

Foreign funds have been net sellers of $100.7 million in Indian equities in the May 1-24 period, in contrast to being net buyers in the first four months of the year, with total net investments of nearly $1.6 billion.

But central bank governor Bimal Jalan clarified that the role of foreign funds in the rupee's weakening was not significant.

"Foreign fund repatriation can't be very large. The sales in the past few days must have totalled just $100-200 million which is not much compared to the volumes in the forex market," said Jardine's Bhat.

He said the only surprising thing was that the fall was so sudden when the expectation was that a gradual slide would happen.

Analysts said most funds invested in the country were India-dedicated funds and would be sitting on around 10-15 per cent cash in volatile times. But they were unlikely to repatriate funds unless there were redemption pressures.

Back to top

(c) Copyright 2000 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Tell us what you think of this report