2014-04-08 04:32:02 -
Mohsin Jameel is CEO of Tradenext, a leading London based financial provider of derivatives trading solutions to private investors and institutions. The firm offers trade execution in the dollar rupee cross. In this article, he offers his views on the general elections taking place in India. He is a seasoned commentator on emerging markets, having spent time working and building up his business in India.
After hitting an eight month high, the Indian Rupee is experiencing a recovery in time for the elections taking place this month. The high expectations of political stability and fast economic recovery after the new government is elected, is predicted to bring bulls into market and boost the Indian Rupee, causing it to rally against the
The BJP (Bharatiya Janata Party), the main opposition, is leading in the polls for the elections starting this week, as voters are still angry at the current Congress Party for corruption scandals and slow growth of economy. Fundamentals are improving for India and there is a possibility if the BJP wins, it will boost currency inflows into the country, which could strengthen the Indian rupee even more. Plus the party supports the gas price issue revision to defer gas price increases.
Since last year’s crisis, the Indian Rupee has grown by 14.76%.The benchmark for repurchase rate has been settled at 8% and it is expected to remain at the same rate in April. India’s current account deficit is forecast to be kept below $40 billion against last year’s $88 billion.
And GDP has been forecast to grow 4.9%, which is 0.4% faster than previous year.
Leading up to the election, the rupee has been getting stronger, gaining profits on the back of massive inflows from the government stake sale in Axis Bank. The trade deficit has lowered as the government raised duties on gold imports. Imports are expected to increase alongside the country’s recovery. Exports on the other hand have also been rising which has been linked to weak currency, attractive for foreign demand.
The stock market is advancing as well, where inflows from foreign institutional investors to the equity and debt market, have been the biggest contributor. Inflation has lowered in India and government forecasts faster growth and the deficit to narrow.
The Indian rupee still seems to be undervalued and we expect it to reach higher highs in upcoming weeks. The seesaw action will not be a big surprise following weeks of rumour and gossip. Positive and negative outlooks could bring volatility in this market.
From a technical view, the rupee against the dollar managed to break the long term resistance of 0.0165 and close above it. It seems to be heading to the rate of 0.018 soon and if the new government delivers as promised, we can see the Indian rupee continue to blossom.
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