Rupee 5 Month High

Rupee at 5 Month High

The rupee hit five months high as there are heavy FII inflows. The appreciation of rupee helps in the improvement of fiscal deficit. But the underlying question is, how far can we expect foreign funds to flow into the Indian system. The FIIs show interest in India as they feel that India is a good destination for investment as the fundamentals are good and the country is showing a good recovery from slowdown. Nifty touching 5700 level also adds up to the statement mentioned above.

What else can the Indian Government do to keep attracting foreign inflows? Firstly, RBI has to decrease the interest rates(Repo Rate), more reforms must take place and the heavy weights of Index such as RIL, INFOSYS, SBI etc must perform to take the NIFTY to the next level. The divestment news that came from ministry is quite a positive one but there are certain factors that may weigh down the Indian markets.

The first one being the RIL KG-D6 block case. The government has not taken any initiative regarding this as the RIL has asked for a price hike in Gas.The most difficult part is the KG-D6 block may get closed in the year 2014-2015 if necessary actions are not taken by the government.

INFOSYS is a very good share to buy but one must understand how the appreciation of rupee would hurt the earnings of the company. Infosys has lot of its business which depends upon US and it makes decent profit whenever there is a depreciation in the Rupee. If its the other way around, the company may face unintended consequences.

SBI has to deal with its Non-Performing Assets as they constitute a major concern for fall in its share price.

These are very few factors but a lot of other factors are present which can degrade the Indian markets. Lets all hope the RBI cuts the rates when it meets this time around. 

Nifty testing 5700 level?

NIFTY at 5700, what's next?

The month of October saw a huge rally in Indian Markets as there were few reforms which took place at the global levels such as ECB bond buying and Quantitative Easing 3 which took most of the global indices to a 52 week high. But the underlying question is, how far are these reforms useful and the answer was quite imminent on the very next week.

The Dow Jones fell around 106+ points and what ever rally that had taken place in all the global indices was due to news but not because of any fundamentals. The same thing happened in Indian Markets too. But Indian markets survived the rally due to domestic reforms that have taken place immediately after the reforms announced by ECB and US FED.

Nifty has reached 5700 level yesterday and it didn't break 5700 level to the downside. The FII money has been pouring in due to the latest reforms such as acceptance of  FDI in single and Multi-brand retail, FDI also in aviation boosted the markets. Airlines which are feeling the debt pressure such as KingFisher Airlines can have a sigh of relief after this announcement. But the biggest question is, who will go ahead in venturing with KFA which has a lot of Debt on its balance sheet?

Since, Diwali is on the cards, we can see uptrend in NIFTY as well as SENSEX. But to maintain this trend, RBI should deregulate measures such as decrease in repo rate which boosts liquidity into the market but the challenge against RBI is INFLATION which is not slowing down.

One can also sense the political turmoil that is taking place at the national level as Mamata Banerjee withdrew support leaving congress on a thread for a while, but the UPA government is very insistent in the reforms such as FDI.

This month we have a hearing from RBI regarding interest rate cuts as well as results from few companies such as Maruti Suzuki. Since there was a lockout at Manesar plant and the production was low, what other factors can keep the profits of Maruti intact should be a wait and watch move.

Above all, this month is supposed to be an action packed one and lets hope NIFTY maintains the current levels or enters into new resistance levels.