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Readings: Sensex crosses 17k, Forex for infrastructure, Market breadth

Overseas investors bought a net 12.8 billion rupees ($315 million) of Indian shares Sept. 24, taking their total equity purchases this year to $11 billion, according to the latest figures provided by the Securities & Exchange Board of India’s Web site. The figure exceeds the previous annual record of $10.7 billion set in 2005.

India would need $492 billion for infrastructure during the 11th Plan period (2007-12), Planning Commission Deputy Chairman Montek Singh Ahluwalia said in New York yesterday. The commission expects $30 billion to come through the ECB route.

Between FII equity investments, FDI in general, and infrastructure ECBs, it seems to me that the rupee:dollar rate will see double-digit moves. Here’s a wild guess: the exchange rate will hit 30 by 2010.

17,000 and Back! Nifty 5,000 in Sight @ TIMAMO blog

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    2 Responses to “Readings: Sensex crosses 17k, Forex for infrastructure, Market breadth”

    1. Dr. Dan Says:
      September 27th, 2007 at 12:45 pm

      Kaushik,

      When you say Re at 30 , are you not worried about Indias CAD ? (Current acc deficit )

      Also, isnt Rupee already overvalued on a REER basis ?

    2. Kaushik Says:
      September 27th, 2007 at 2:32 pm

      First, just as a CYA thing, let me repeat that 30 is a WAG. (Am trying to keep the language clean, so will just say that the A stands for A$$ :)

      As to current account deficit, who knows how fast it might change - I don’t put too much weight on future projections of import expenses, inflation, etc. Also, is it even as issue? See this: http://www.rediff.com/money/2005/nov/28def.htm

      Overvaluation: Again, you’ll find several articles on why the REER/NEER may be flawed measures.

      What I do know is that there will be $100B +/- coming into India every year through various channels over the next few years. And the RBI will have to let the rupee take some of this impact. Even if the RBI keeps accumulating dollars at a fast pace, it will have to let the rupee take some of the hit.

      Also, as rupee futures become liquid and the Indian corporate bond markets develop, there’ll be even more Indian assets for foreigners to invest in.

      Macro-economics is a land-mine for predictions, so never take any currency forecasts too seriously.