Strong US dollar will offset FII inflow

According to Care Ratings, while strengthening of the US dollar has caused volatility in the currency markets, FII inflows may provide cushion to the Indian rupee against a strong dollar


The strengthening of the US dollar in recent times has caused some element of volatility in the currency markets. Given that this strengthening of the dollar is synchronous with the US recovery and likely increase in interest rates, it does need to be watched carefully. However, if the current positive trend of foreign institutional investment (FII) inflows in equities and debt securities is sustained, it will provide some cushion to the Indian rupee, says Care Ratings.


It said, given that other components of the external account like import of oil has benefited partly due to the strong dollar, as the price of oil gets calibrated to the dollar and when the dollar falls, the price of oil increases and vice-versa, there would be some countervailing force to stabilise the rupee. "The implication is that while the Reserve Bank of India (RBI) has brought about order in the balance of payments and several components like imports, external commercial borrowing (ECB) flows, and FII funds, it would also have to constantly monitor changes in the external account on account of such changes in the currency value," the ratings agency said.


According to a research note, a stronger dollar, though good for the US economy would militate at the margin for its exports, though it is still considered to be a domestic driven rather than an external driven economy unlike some of the East Asian emerging markets. "But one consequence has definitely been that commodity prices have started coming down aided also by the low growth expected in countries like China which cannot be countered by the US recovery. China is the largest consumer of metals and prices have been moving southwards since August," the report said.


Talking about impact of stronger US dollar on other currencies, Care Ratings said, while the movement of the currency for any country is dependent on the various factors that affect the balance of payments, there is prima facie reason to believe that some part of the movement can be explained by the stronger dollar. It should be mentioned here that domestic factors have also influenced such movements like the Russian ruble being affected by the Ukraine imbroglio, it added.


According to the research note, there are two direct consequences of the stronger US dollar. The price of gold which bears an inverse relation with the strength of the dollar has moved downwards to below the $1200 per ounce mark. Traditionally gold is held as a substitute for the dollar as a safe haven. With the dollar becoming stronger, it said, a trend which will probably continue to move in this direction, gold has taken a hit along with other commodities.


"There has also been a flow of funds to the US now and a movement away from the other foreign bonds. This will have an impact in the coming months on the overall flow of funds to the emerging markets which benefited from both the QE programme as well a weak dollar," the report concluded.


Bhopal gas tragedy victims appeal to higher court in the US

According to victims, the project manager who approved all of the detail design for the Bhopal plant stated in a newly-submitted declaration that he was working for Union Carbide, which the lower court chose to disregard


Victims of the 1984 Bhopal gas tragedy have filed an appeal in a higher court at New York contesting a lower court’s decision that Union Carbide Corp cannot be sued for the ongoing contamination from the chemical plant.


The survivors and members of the surrounding community near the plant site in Bhopal in Madhya Pradesh for toxic contamination, along with the property owners whose wells have been fouled by toxins from the plant, have filed the appeal in the US Court of Appeals for the Second Circuit.


The plaintiffs allege that UCC was intimately involved in the creation and disposal of toxic wastes at the Bhopal plant by designing, providing, approving and overseeing the construction of an inadequate waste management system.


The manager, who oversaw the construction of the plant confirmed that he worked for UCC, not for the Indian subsidiary that officially operated the plant, the plaintiffs said.


In July, however, a federal trial judge ruled that UCC was not sufficiently involved in the acts at the plant and that the project manager actually worked for the subsidiary.


“The plaintiffs have provided substantial new evidence that demonstrates UCC’s involvement. But the court chose to improperly assess the weight and credibility of this evidence, assessments that are supposed to be left to the jury,” counsel for the plaintiffs and Litigation Coordinator for EarthRights International, Rick Herz said.


Non-governmental organisation EarthRights International said since judges are not supposed to weigh evidence without letting a jury hear the case, the plaintiffs believe that the Second Circuit will correct the error in judgement against UCC.


Another defendant in the case was Warren Anderson, who was the CEO of UCC at the time of the Bhopal disaster. He died in September this year at a nursing home in Florida at age 92.


In the appeal filed last Friday, the plaintiffs said the Project Manager who approved all of the detail design for the Bhopal plant, Lucas John Couvaras, stated in a newly-submitted declaration that he was working for UCC, which the court chose to disregard.


“The new evidence here — most notably the declarations of Couvaras and the experts — fills the gaps identified in (the case). A rational jury could credit Couvaras’ declaration that he was a UCC employee, and agree with Plaintiffs’ experts that UCC’s manufacturing process and waste disposal strategy were causes of the pollution. Summary judgment must be reversed,” the appeal said.


In December 1984, poisonous gas from the chemical plant enveloped nearby communities, killing over 5,000 people. UCC then largely abandoned the site, allowing toxic wastes to leach into the local water supply.


EarthRights had filed the lawsuit in the Southern District of New York on behalf of residents of Bhopal, saying land and water of the citizens are being contaminated by waste from the plant.


In his July ruling, US District Judge John Kennan had ruled that UCC was not sufficiently involved in the acts at the plant and that the project manager actually worked for the subsidiary.


Fund mop-up via preferential issue falls over 38% in April-October

Of the total Rs21,422 crore mopped up in the current fiscal, Rs14,193 crore was mobilised from 119 issues listed on the BSE and NSE


Funds mobilisation by listed companies through preferential allotment of shares dropped by 38.5% to Rs21,422 crore during the first seven months of 2014-15 compared to the same period last year.


According to the latest data compiled by the Securities and Exchange Board of India (SEBI), during April-October 2013, companies garnered Rs34,851 crore through issuance of shares to their respective promoters and shareholders on a preferential basis.


However, the cumulative number of preferential issues during April-October 2014 stood at 293, about 42 issues more than what was witnessed in the preceding period.


Month-wise, funds mobilised in May were highest at Rs5,142 crore, followed by Rs3,271 crore raised in June.


Besides, companies had raised Rs3,160 crore in April, Rs2,159 crore in July, Rs2,265 crore in August and Rs2,821 crore in September.


During October, there were 39 preferential allotments valued at Rs2,605 crore, a decline of 7.65% in terms of value over the preceding month.


The latest data with SEBI is available only till October.


Of the total Rs21,422 crore mopped up in the current fiscal, Rs14,193 crore was mobilised from 119 issues listed on the BSE and NSE.


Moreover, Rs4,437 crore was raised through 61 issues listed on the BSE, while funds amounting to Rs3,324 crore were garnered from 126 issues on the NSE during the period under review.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)