The macroeconomic indicators of the country improved significantly in last few days. The currency swap agreement with Japan, end of RBI-finance ministry scuffle, the new reports about 8 countries including India ‘likely’ to get waiver from US sanctions, over Iran over oil imports and the possibility of softening of trade war in US and China has brought good news to markets across the world.
“Sentiment has started turning a bit positive after Trump made a move to seek truce with China. There was also a news report that US has given India waiver to buy Iranian oil,” said Deven Choksey, group managing director, KR Choksey Investment Managers Private Limited. Rupee gained 100 paise against American dollar, this is highest intraday gain in last five years. The positive vibes were seen in Bombay Stock Exchange and National Stock Exchange too. The benchmark indices at BSE jumped 579.68 points, almost 1.68 percent and closed at 35,011 while for Nifty, the benchmark indices gained 172 points, 1.66 percent and closed at 10,553. Sensex has gained 4.99 percent which is best weekly positive move since May 2016.
The positive ride at markets and of currency was supported by southward movement of crude oil prices. The crude oil has registered 15 percent decline over the last month, with a 3 percent dip on Friday. The crude oil price impacts Indian economy on a very large scale, as India imports almost 85 percent of its petroleum requirements and therefore a rise in prices pushes the import bill. This results in widening of Current Account Deficit, which is bad for macroeconomic stability of any country. Thus a dip in crude oil prices is a huge relief for Indian economy.
“Trading sentiment got a boost amid a fall in global crude prices and rising rupee. Positive global cues also triggered buying. In the global commodities markets, Brent for January 2019 settlement was off 18 cents at $72.71 a barrel. The contract had fallen $2.15 a barrel or 2.87 per cent, to settle at $72.89 a barrel during the previous trading session,” said Abhijeet Dey, senior fund manager-equities at BNP Paribas Mutual Fund.
Economic Affairs secretary Subhash Chandra Garg took a dig at deputy governor of RBI, Viral Acharya’s criticism that “Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution.” He tweeted that market conditions are improving despite the so called government’s interference in functioning of RBI. “Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. Wrath of the markets?” Garg tweeted on Friday.
Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. Wrath of the markets?
— Subhash Chandra Garg (@Subhashgarg1960) November 2, 2018
Rupee had become highly volatile in last few weeks. Congress party created lot of mayhem on falling value of rupee over the last few weeks. The price of Rupee against Dollar fell primarily due to global conditions. The currency of other developing Asian economies also fell and in most of the cases, more than the Rupee. But Congress tried to reap political benefits out of it and called for ‘Bharat Band’. The conditions have improved now due to better global conditions and by the proactiveness of the government.