Rupee goes into a spin on QE3 taper & Syria, drags markets along - Cholamandalam Securities

The rupee dropped close to 68.8 levels Vs USD due to concerns on QE3 tapering & Syria even as data points on ~ 12% improvement in merchandise Exports supported a reduction in CAD for FY14. Concerns on the Food Security Bill aggravating the Fiscal Deficit added to the free fall. INR appreciated closer to 66 levels after RBI announced a separate window for oil companies, which will bring down the reserves.

Further likely curbs on non-essential imports and cut in fuel subsidies are expected to improve the CAD and Fiscal deficit. The Land Acquisition Bill has been passed and while this will increase the cost of land acquisition, might result in less litigations later.

FII holding in Indian Equities is estimated to be $205bn and Indian Debt at $25bn. August witnessed a net outflow of $900 mn in FII Equity investments, taking down the cumulative YTD inflows $11.6bn. FII Debt outflows were higher at $1.6bn, though Indian yields went up, bringing the cumulative YTD flows to an outflow of $1.35bn, primarily due to INR depreciation and volatility which makes hedging difficult.

Source : Equity Bulls

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