Wednesday, September 14, 2011

Why Depreciating Rupee is good for short term..

If you look at Indian currency INR (Rupee), it has been depreciating from past 45 days, the reason might be the outflow of dollars. High inflation numbers and poor industrial performance is also not helping the stock markets. We are seeing the spur in demand of precious commodities like gold and silver as lot of economist are fearing a double dip recession. Our currency has now depreciated to more than 48 per dollar from 44.5 just 45 days back which is nearly 7 to 8%. But this deprecuition of currency might be good for the country in short term.

1. It will make exports Competitive and might improve the capacity utilization of manufacturing companies. 

2. Increase the investment in Indian equity and Debt market as dollar will get god valuation.

3. Curb outflow of investments from India and the money might be invested in Indian businesses.

4. Natural Hedge against the selling by FIIs as the FIIs will loose in dollar terms.

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