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.
