Exit copper at 448
Wednesday, 14 August 2013
Monday, 12 August 2013
Thursday, 8 August 2013
Rupee over 60: Why currency weakness may be here to stay
Domestic forwards markets, which
reflect market expectations, see the rupee trading at around 65 to the
dollar in a year, while offshore forward markets see it at 66.
Domestic forwards markets, which reflect market expectations, see the rupee trading at around 65 to the dollar in a year, while offshore forward markets see it at 66.
Pessimism remains even as the government is widely expected to announce steps soon to encourage more foreign inflows, including potentially raising debt abroad, after the Reserve Bank of India's steps to drain cash from the financial system failed to prop up the currency.
"We're very worried about the situation in India," said Walter Rossini, who manages the 130 million euro Gestielle Obiettivo India Fund in Milan.
"There's no fast fix to this situation. Probably we will see a turnaround of the economic cycle in a few quarters but rupee volatility will stay for longer. I don't see a strong case for it coming back to the average level of last year," he said.
The rupee hit a record low of 61.80 on Tuesday, marking a 10 percent fall so far this year - the worst performer in emerging Asia in currencies tracked by Reuters. Over two years, it is down 26 percent.
A record high current account deficit at 4.8 percent of gross domestic product has made India particularly vulnerable in an emerging markets sell-off sparked by anticipation the U.S. Federal Reserve will soon wind down its ultra-loose monetary policy.
Graphic on rupee, bonds, implied FX yields, click http://link.reuters.com/gaw89t
Plenty of challenges
One of the first tasks confronting former International Monetary Fund chief economist Raghuram Rajan, who takes over at the helm of the central bank on September 5, will be whether to continue the RBI's liquidity tightening steps, which have failed to stem the decline but have pushed up short-term borrowing costs, adding to pressure on the already cooling economy.
In the meantime, New Delhi is widely expected to announce measures such as raising money from Indians abroad, but emergency steps are likely to prove insufficient unless India tackles fundamental and years-old problems that deter more robust inflows from corporations and other long-term investors.
Those problems include heavy dependence on oil and gold imports, high inflation and political and bureaucratic gridlock that deter capital investment.
The task facing Rajan and Finance Minister P. Chidambaram is complicated by the ruling coalition's weakness ahead of general elections by next May, in a global investor environment that no longer favours emerging markets.
"At the end of the day, it's a political issue that's really been holding back India to a large extent. Even with the right policies, if minority parties don't support reforms, it's going to make it very difficult for them to move forward," said Rajiv Biswas, economist at IHS Global Insights in Singapore.
In his current role as chief economic adviser, Rajan has suggested raising money from Indians abroad or easing overseas borrowing norms - steps that would be likely to boost the rupee and bring down bond yields, at least in the near-term.
Raising interest rates, one of the traditional tools for defending a currency, might attract inflows but risk eroding confidence in an economy growing at a decade low of 5 percent.
Higher interest rates could also choke off inflows into equity markets, which have been a relative bright spot. Despite foreign exits over the past two months, Indian stocks are sitting on net inflows of $12.7 billion in 2013.
"The underlying situation is deteriorating. The economy is struggling to grow, there is a fiscal and current account deficits, and we are going into an electoral period," said Philip Poole, global head of macro investment strategy at HSBC Asset Management in London.
"From a fundamental point of view, the currency looks cheap, but the flows in the short term are a concern. There needs to be some consistent policy coming from the government and the central bank."
Wednesday, 7 August 2013
Tuesday, 6 August 2013
INLFLATION
Inflation is a word which is used frequently in our economy.Inflation rate is the rate at which prices of goods and services increase in its economy. It is an indication of the rise in the general level of prices over a period of time. Since it's practically impossible to find out the average change in prices of all the goods and services traded in an economy.But a sample set or a basket of goods and services is used to get an indicative figure of the change in prices, which we call the inflation rate.
Inflation happens when there are less goods and more buyers, this will result in increase in the price of goods, since there is more demand and less supply of the goods.For example last year, one commodity price was Rs 100, same commodity this year is Rs105, here inflation is 5%. The 100 rupee money value in past, present & future has to be same as Rs 100 only. But commodity price increased, this is called inflation. Inflation shows the purchasing power an individual.
What are the methods of calculating Inflation???
There are mostly two methods are used to find out inflation
- Consumer price index (CPI)
- Wholesale price index (WPI)
WPI was first published in 1902, and was one of the more economic indicators available to policy makers until it was replaced by most developed countries by the Consumer Price Index in the 1970s. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. The Indian government has taken WPI as an indicator of the rate of inflation in the economy. 435 commodities are used to find out the Wholesale price index (WPI).
How to calculate WPI???
In this method, a set of 435 commodities and their price changes are used for the calculation. The selected commodities are supposed to represent various strata of the economy and are supposed to give a comprehensive WPI value for the economy.
WPI is calculated on a base year and WPI for the base year is assumed to be 100. To show the calculation, let us assume the base year to be 1970. The data of wholesale prices of all the 435 commodities in the base year and the time for which WPI is to be calculated is gathered.
Let's calculate WPI for the year 1980 for a particular commodity, say wheat. Assume that the price of a kilogram of wheat in 1970 = Rs 5.75 and in 1980 = Rs 6.10
The WPI of wheat for the year 1980 is,
(Wheat price in 1980 - Wheat price in 1970) (6.10-5.75)
------------------------------------------------X100= ------------- =6.09
Wheat price in 1970 5.75
Since WPI for the base year is assumed as 100, WPI for 1980 will become 100 + 6.09 = 106.09.
In this way individual WPI values for the remaining 434 commodities are calculated and then the weighted average of individual WPI figures are found out to arrive at the overall Wholesale Price Index. Commodities are given weight-age depending upon its influence in the economy.
How is inflation rate calculated???
If we have
the WPI values of two time zones, say, beginning and end of year, the
inflation rate for the year will be,(WPI of end of year - WPI of beginning of year)
--------------------------------------------------------- X 100
WPI of beginning of year
For example, WPI on Jan 1st 1980 is 106.09 and WPI of Jan 1st 1981 is 109.72 then inflation rate for the year 1981 is,
(109.72 -106.09)
-------------------- X 100 = 3.42%
106.09
and we say the inflation rate for the year 1981 is 3.42%.
Since WPI figures are available every week, inflation for a particular week (which usually means inflation for a period of one year ended on the given week) is calculated based on the above method using WPI of the given week and WPI of the week one year before. This is how we get weekly inflation rates in India.
When inflation numbers published???
Every month 2nd friday inflation numbers will be published.
Relation Between inflation & Bank Interest rates???
Now a days, you might have heard lot of these terms and usage on inflation and the bank interest rates.Bank interest rate depends on many other factors, out of that the major one is inflation. Whenever you see an increase on inflation, there will be an increase of interest rate also. RBI's one of major duty is to controlling the inflation in a specific range by changing his monetary policy.
What is deflation???
Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period.
Inflation history???
Historically, from 1969 until 2012, India inflation rate averaged 8%, reaching all time high of 34.7% in septemper of 1974 and a record low of -11.3% in May of 1976.
BOOK VALUE, EPS, PE RATIO
The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities. Book value is a most accurate measure and valuation of the firm.
In simply, It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated. By being compared to the company's market value & the book value can indicate whether a stock is under or overpriced.
Also known as "net book value (NBV)."
What is EPS???
Earnings per share is generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. Earnings per share serves as an indicator of a company's profitability in the near term financial year.
Net profit-Dividend on preferred shares
Eps = ------------------------------------------
Average outstanding shares
What is PE Ratio???
The price to earning (P/E) multiple or ratio is probably the most popular indicator used by investors for valuing stocks.It is the ratio of a company's stock price to it earning per share.
Current market price (CMP)
PE = -------------------------------
Earning per share (EPS)
It tells you how to cheap or expensive a company's stock is. It is the number of times investors must pay for the company's current earnings. For example, assume that the share price of a company is Rs.120. If its EPS is, say Rs 20, its P/E is 6, So investors are willing to pay 6 times for every rupee of the company's earnings. or in other way, if that firm runs on same profitable way then your invested money will get double in next 6 years. Investors have to consider this ratio before investing, we suggested go any stock which having PE ratio below 5. Avoid high PE ratio stocks.
Monday, 5 August 2013
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