Information Madness

Nowadays, investors do not normally spend a lot of time studying currency fluctuations. Not many people in the country are aware that the Indian Rupee has slipped to Rs.47.85 against the United States Dollar. Actually, people cannot be blamed because the Rupee does not get that kind of priority as Sensex even on the television or the business publications.

Some investors don’t understand the forex market genuinely to make sense of such news. Unlike the Sensex, the Rupee’s going up against the dollar in value and not in weight is not positive news. It means the real opposite when its value goes up in terms of the Dollar. About a couple of months back, you would have paid only Rs. 44 for a Dollar. The Rupee depreciation is bad news for the stock market as it hurts the economy and increases inflation.

A weak Rupee pushes up the fiscal deficit more. As India imports about 70% of its required consumption of crude oil, the country will have to pay more for it in Rupee value. It is the poor consumer who is going to face the brunt as the high prices are passed down to him or her as the lid is off for the control on oil prices.

Higher oil prices have a ring effect on everything and that pushes inflation up. Inflation is getting, as it is, dangerously close to the double digit mark. Companies also have to pay more in Rupee terms for their raw materials despite the fall in global commodity prices due to the Rupee’s depreciation. This will also have a negative impact on the foreign investment inflow into the Indian business.