Much has been written about the melt-down currently gathering pace in India, a move that began back in May when the US Fed announced its tapering intentions and recently exacerbated the by Syrian crisis causing a spike in oil prices so damaging to India’s oil-import dependent economy.
But the real problem seems to be far more domestic from what I can perceive from afar, and from the many comments from locals in our room.
With the rupeee today falling to new record lows vs USD beyod 68.50 amidst the the fastest one day fall in over 20 years, and a 20% depreciation on the month to date, the crisis of confidence in the Indian authorities continues at pace.
Stock markets have also been smacked lower with the Sensex Index losing over 5% this week alone. Shares in Indian banks have suffered badly since the RBI introduced measures last month to support the rupee. The sell-off has hit almost every sector in the economy, with the exception of the IT outsourcers, and this has led to increasing worries about a deeper capital withdrawal from foreign investors pouring more fuel onto the already raging fire.
I highlighted the depth of this investment in a piece previously and it’s not looking like the investors are wasting much time in showing their disregard of actions by the government or RBI as outflows increase at a rapid pace.
Actions taken thus far in a bid to restore confidence and stem the flows have in fact had the reverse effect and are a clear indication that no one seems to be in control or has a grasp on what’s required. Whatever happens externally this crisis of confidence will continue for some time to come as the emerging market bubble is now well and truly burst.
I don’t pretend to have the answers, but clearly neither do the Indian authorities.
Perhaps our ForexLive community has ?
