India Forex - Forex Trading in India

India Thursday 11 March 2010: India’s central bank did not buy or sell dollars in the foreign exchange market in January, the central bank’s monthly bulletin showed. The
Reserve Bank of India (RBI), also did not intervene in the forex market in December.

The RBI data was released late on Wednesday. The rupee had been volatile in January moving both ways, and traded in a wide range of 46.62 to 45.285, which was its strongest level since September 2008. In 2009 the central bank sold a net $5.8 billion to prevent the rupee from depreciating sharply.

In early March 2009, the rupee had dropped to a record low of 52.2 per dollar but ended the year up 4.7 percent helped by large foreign fund inflows. From April to January, the first 10 months of the 2009/10 fiscal year, the central bank has been a net seller of $2.6 billion. On Wednesday at 0500 GMT, the partially convertible rupee was trading at 45.46/47 per dollar, weaker than its previous close of 45.375/385.

India Wednesday 10 March 2010: The foreign exchange derivatives contracts entered into by Indian companies in the last two to three years has starting taking its toll now on companies’ performance on the back of continued depreciation of the rupee against the dollar.

The performance of the BSE 100 companies has been far worse with aggregate forex losses of around Rs 43,000 crore comprising mark-to-market (MTM) loss on forex loans and outstanding forex derivative contracts which accounted for 21.4% of the reported profit before taxes, according to a recent Edelweiss Report.

However, the impact went unnoticed because of some crucial changes in accounting norms last year allowing these losses to be kept off the profit and loss statement.
During 2007, companies entered into derivatives structures to reduce their interest costs. Many companies had opted for dollar loans. The appreciation of the rupee eroded the revenues and profits of exporters as they made fewer rupees for every dollar earned abroad. On the other hand, they had to service the dollar loans, on which they incurred a higher interest outflow.

Of this number, mark-to-market (MTM) losses, which mainly relate to forex derivatives contracts, aggregated Rs 24,300 crore. The numbers were arrived at from individual disclosures by these companies in their annual reports, the Edelweiss report said. These losses could be in multiples if one considers all the listed and unlisted companies in India which had bought forex exchange derivatives from a clutch of banks during 2007 and 2008.

The main reason for such huge losses was depreciation of the rupee against dollar in 2008-09. Edelweiss now expects that the appreciating rupee will lead to paring of these MTM losses for Indian companies.

For every 10% appreciation of the rupee, aggregate MTM gains during the current financial year (FY10), for the BSE 100 companies, will be about Rs 12,200 crore, it said.

Factors such as market liquidity, investor behaviour, regulatory structure and tax laws will have a heavy bearing on the behaviour of market variables in this market.

Experts believe that increasing convertibility on the capital account would accelerate the process of integration of Indian financial markets with international markets.

India Tuesday 9 March 2010 - The Rupee advanced to the strongest level in almost eight weeks on speculation that accelerating economic growth will attract overseas funds to local assets.

The currency extended four weeks of gains and the Sensex advanced to the highest level since January 20 after Finance Minister Pranab Mukherjee said India aims to return to a 9% pace of economic expansion. Global investors bought $705 million more local shares in the three days through March 4 than they sold, exchange data shows.

“The rupee is rallying because the equity market is showing a strong positive trend and capital flows are improving,” said Roy Paul, assistant manager of treasury at Federal Bank in Mumbai. “The economic outlook is encouraging.”

The rupee strengthened 0.2% to 45.53 per dollar. It touched 45.38 earlier, the highest level since January 11. The rupee has gained 2.2% so far this year, the third-best performer among the 10 most-active Asian currencies outside of Japan.

Offshore contracts indicate bets the rupee will trade at 45.57 to the dollar in a month, compared with expectations of 45.65 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

India’s economy may expand 8.2% in the 12 months from April 1, from an estimated 7.2% this year, the finance ministry forecast on February 25. Gross domestic product growth averaged 9.5% per annum between 2006 and 2008.

India Monday 8 March 2010 - Post-Budget 2010-11, the rupee has gradually appreciated over last week on the back of (a) positive reaction to the Budget by equities market and (b) reducing nervousness about Greece’s deficit problems in global currency markets.

With the important US non-farm payrolls data out of the way, which has come robust despite weather problems in February, we expect the rupee’s gradual pace of appreciation to continue over this week.

Assuming no fresh bout of risk-aversion news from the global markets, we expect spot rates to test the low seen in early January.

This week, the move will be supported by the likely participation of international investors in the large NMDC IPO. No specific large movements are expected in any of the major currencies this week as global data release is light with only likely market-moving data being the US advance retail sales and University of Michigan Confidence index, due on Friday.

India Friday 5 March 2010: The rupee rose to its highest level in more than six weeks on Friday morning as stronger regional peers and a higher open for the domestic sharemarket cheered sentiment.

At 9:08 a.m. the partially convertible rupee was at 45.75/76 per dollar, its strongest since Jan. 19 and above its previous close of 45.80/81 on Thursday.

Most Asian units were stronger compared to the dollar. The index of the dollar against six major currencies was also down 0.1 per cent.

The BSE Sensex rose 0.6 per cent in early trade on Friday, with Reliance Industries and ICICI Bank leading the gainers, taking cues from firmer Asian equities.

India Thursday 4 March 2010: The Rupee climbed to a fresh six-week high on Thursday, putting it on track for a fourth consecutive day of gains, as strong regional peers boosted sentiment. Lower shares limited the rise.

At 9:50 a.m. (0420 GMT), the partially convertible rupee was at 45.78/79 per dollar after hitting 45.76, its strongest since Jan. 19, and above 45.82/83 on Wednesday.

Most regional currencies were higher compared to the dollar. However, dealers said they would watch the dollar index against six majors that was up 0.1 percent for further direction.

“The gains for the rupee from now on will be shallow with deep pull-back on reversal in EUR/USD and Sensex,” said J. Moses Harding, head of global markets at IndusInd Bank.

“For the day, let us watch 45.70-45.85 and would not prefer sustainability in the EUR/USD strength beyond 1.3700 and Sensex above 17,000. The entry into 45.50-45.65 will be yet another opportunity for strategic positioning for importers and unwinding for exporters,” he said.

The euro was firm as investors, encouraged by Greece’s fresh austerity measures to reduce its deficit, cut some of the record short positions in the single currency.

Dealers said a choppy local share market was weighing on sentiment as it failed to provide clarity on the direction of capital flows which are crucial in determining the rupee’s fortunes.

The BSE Sensex opened marginally higher but soon turned negative, limiting the rupee’s upside.

One-month offshore non-deliverable forward contracts were at 45.78/88, little changed from the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 45.8775, with the total traded volume on the two exchanges at about $560 million.

India Wednesday 3 March 2010 - The Rupee advanced to its strongest level in a month after Finance Minister Pranab Mukherjee pledged to rein in the budget deficit. The currency appreciated for a second day, rising in tandem with the nation’s stocks, after Mr Mukherjee forecast in the annual Budget that the shortfall will shrink to 5.5% of the gross domestic product in the 12 months starting April 1, down from a 16-year high of 6.9% in the current fiscal. India will boost asset sales to as much as Rs 40,000 crore from about Rs 25,000 crore, he said.

“Investors are going to be more positive on India as the fiscal deficit is brought down and the disinvestment process gains momentum,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “The stock market will extend gains and that will help the rupee rise gradually.”

The rupee strengthened 0.2% to 46.0125 per dollar. That is the highest since February 3. The rupee has gained 1.1% so far this year, the fourth-best performance among the 10 most-active Asian currencies outside of Japan. It may appreciate to 45.20 this month, Bhatt said.

Offshore contracts indicate bets the rupee will trade at 46.08 per dollar in a month, compared with expectations of 46.20 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

India Tuesday 2 March 2010: The Indian rupee should start higher on Tuesday, tracking gains in other Asian units and supported by expectations for a firmer opening in the domestic sharemarket.

Most Asian units were stronger compared to the dollar. At 0250 GMT, the MSCI index of Asian stocks excluding Japan was trading 0.6 percent higher, while the Nifty India stock futures traded in Singapore was up 0.3 percent.

The dollar index against six majors was up 0.3 percent. On Friday, the partially convertible rupee ended at 46.085/095 per dollar, about 0.7 percent stronger than its previous close. The market was closed on Monday for a holiday.

India Saturday 27 February 2010: The country’s foreign exchange reserves grew by USD 31.5 billion in the first nine months of this fiscal, but credit for two out of every
three of these dollars go to the rupee appreciation.

The Indian currency’s sharp appreciation against dollar — an eyesore for the export sector that has been the main contributor to forex reserves traditionally — contributed USD 20.3 billion or 64.4 per cent to the total accretion in forex reserves till December 2009 in the current fiscal.

The total foreign exchange reserves increased by USD 31.5 billion in 2009-10 fiscal, from USD 252 billion at the end of March 2009 to USD 283.5 billion in December 2009, according to the Economic Survey presented in Parliament today.

The pre-budget document on the country’s economic health added that the actual accretion in forex reserves was, however, only USD 11.2 billion (35.6 per cent of the total increase of USD 31.5 billion), which was mainly due to rise in FDI inflows and investments from foreign institutional investors.

“… accretion of USD 20.3 billion (64.4 per cent) was on account of valuation gain due to weakness of the US dollar against major currencies,” the Survey said.

Rupee has been appreciating against the US dollar in the current fiscal, largely due to signs of economic recovery and revival in FII inflows after March 2009.

India Friday 26 February 2010: Fitch Ratings has said that Bharti Airtel’s long-term foreign currency rating could be downgraded following the company’s announcement of a potential acquisition of Zain’s African operations for an enterprise value of $10.7 billion.

“Fitch expects the ratings to be downgraded by one notch assuming that the deal is completed and substantially debt funded, as this would increase Bharti’s funds from operations (FFO) adjusted net leverage ratio to a level inconsistent with the current rating,” the rating agency said in a statement.

Bharti’s debt is rated by Fitch as ‘BBB minus’ which places it at the bottom of the so-called investment grade. The rating symbol BBB minus indicates that the company has adequate capacity to pay.

The category below investment grade is the ‘speculative’ or ‘junk’ category; territory that companies like to stay away from. A downgrade by Fitch would mean that Bharti’s foreign debt would be dubbed as speculative, meaning that it may or may not be able to pay.

Amit Tandon, head of Fitch India, said the agency would seek clarification from Bharti once its funding plans became clearer. Bharti Airtel’s spokesman said the company did not comment on actions of rating agencies. The move comes five days after rating agencies Crisil and Standard & Poor’s placed Bharti’s long-term bank facilities and debt programme on ‘rating watch with negative implications’ or RWN.

In the press statement, Fitch said in the event of a downgrade, the rating could be under further downward pressure reflecting the potential costs associated with any bid for a 3G licence and related capex. However, Fitch will seek to resolve the matter once the funding mix for the acquisition is finalised, which according to the company’s announcement, is expected by March-end.

“In resolving RWN, Fitch will also seek clarification on the terms and conditions of the acquisition of debt and also confirm whether all required regulatory approvals are likely to be obtained.

Further, the agency will take into consideration the financial profile of the combined entity and its future business plans when resolving RWN,” it said.

The rating takes into account the uncertainties surrounding the targeted turnaround of the loss-making operations of Zain’s African assets, which reported a y-o-y decline of 11% and 16% in revenues and EBITDA, respectively, in the nine months of FY09 and a net loss of $37 million during the same period.

The RWN also considers the geographical diversification of Bharti’s subscriber portfolio on completion of the deal and its expansion in Africa, where many markets are characterised by high subscriber growth, higher average revenue per users (ARPUs average $8) and low telecom penetration rates, the average being 34%, excluding Ghana.

“However, Fitch also notes that the combined entity would be prone to geo-political and currency uncertainties,” it added.