Impact of weak Indian currency

The rupee’s depreciation against the dollar is seen to be beneficial to the Indian economy in some ways, and detrimental in other ways. The rupee fell to 53 against the dollar, its weakest in nearly 2 years, early on Wednesday as worries Europe could be heading for another banking crisis rattled global markets. Let us quickly analyze theimpact of Weak Indian currency on different institutions.

Impact on Inflation

Weaker rupee complicates government’s battle against runaway inflation. Imports become more expensive. The dramatic dip in rupee’s value has a very bad impact on the economy. While many currencies have been weakening against the dollar, India has been the worst performer in Asia. With the increase in dollar rate, the rupee remains weak & Indian imports of Crude Oil, edible oil, pulses & Capital goods becomes more expensive.  The rise in dollar rate adversely impacts government’s efforts to curb inflation.

Impact on FII inflows

The focus is particularly on crude oil price. Due to the Financial market turmoil, foreign capital inflows have almost dried up, but the demand for Dollars is rising. India’s crude oil import bill has become staggering. Due to rise in the Crude Oil Price, the Oil Marketing companies are shelling out 40/50 dollars more/barrel. Hence there is an increase in the Dollar demand, which have been almost sucked.

Basics of Commodity Markets in India

Back on blogging after a long break. Just got a push from someone today morning which made me start all over again from where I had left it midway.

This post I would just be highlighting a few basics of Commodity Markets. Its not been long that this avenue has come up for retail investors and traders to participate apart from Equity markets. Its a good option for anyone looking at diversifying their portfolio.

So what are commodities and commodity markets?

 Any goods that are unbranded and traded commonly, such as Gold, Silver, Zinc, Rubber, Pepper, Sugar etc are a few of them.

Basically there are two type of markets, Spot and Future (Derivative) markets. In spot goods / commodity is bought and sold in physical form, whereas in Derivative market there are instruments based on commodity are traded via regularized exchanges.

In India we have two major exchanges which are: MCX (Multi Commodity Exchange) and NCDEX (National Commodity Derivatives Exchange). Brokers get registered with these exchanges and in turn clients with brokers.