Feeble rupee, uncertain economic growth and hitch of flows have forced financial service firms and traders to downgrade Indian markets.
JP Morgan demoted Indian stocks to ‘neutral’ from ‘overweight’ in the light of sharp fall in the currency, which has breached the crucial level of 64, that may put further pressure on current account deficit (CAD), while upgraded China shares to “neutral” from “underweight”.
The partially convertible rupee tumbled to 64.11 on Tuesday.
Adrian Mowat, Chief Asian Emerging Market Equity Strategist at the global investment bank said in an interview with ET Now “India has got three problems – rupee, rupee and the rupee. This is all about the currency. If rupee starts trading in 61 and 62 range, I would be buying this market.”
The vertical move in the currency, which has already devalued nearly 13 per cent against the dollar so far as this year measures adopted by the government and the Reserve Bank of India (RBI) have failed to stem the fall.
In an interview to ET Now, the renowned Wall Street trader Jim Rogers said the measures taken by the Indian government and the Reserve Bank recently to improve the macro-economic sentiment and arrest the fall of rupee have not capitulate any results and have instead made the situation worse.
Rogers, who is the chairman of Rogers Holdings and Beeland Interests Inc, says “the government just doesn’t understand economics. Debt is rising and the balance of trade is going higher. The government is making more mistakes and that’s not going to solve the problem,” he said in an interview to ET.
The lack of confidence in our growth story is keeping most investors on the sidelines.
With the general election approaching next year, the government is instead betting on expensive populist policies and has woken up late to the harsh reality that the economy faces.
It will be tough to imagine inflows resuming into the economy till some material steps are taken to revitalize the declining confidence. So, over the medium term there is high probability that the rupee will slip to Rs 65 levels.
The Reserve Bank of India (RBI) has recently announced several measures, including curbs on Indian firms investing abroad and outward remittances and putting stricter control on banks dealing in foreign currencies, in a bid to control the outflow of money.
Despite these measures the currency and the equities markets are on the free fall. The rupee continues to hit new record lows almost every week.