Rupee dancing to the moves of FIIs
There is a strong correlation between the value of rupee against the dollar and the buying\selling activity of foreign institutional investors on stock exchanges, reveals a study.
By PTI |
MUMBAI: There is a strong correlation between the value of rupee against the dollar and the buying\selling activity of foreign institutional investors on stock exchanges, reveals a study.
The study found that withdrawal of Rs 5,000 crore by foreign funds from the stock market triggered a fall of seven per cent in the Indian rupee against the dollar early this year.
Pramit Brahmbhatt, CEO of Alpari India, a subsidiary of Alpari UK, a global foreign exchange trading company, said the Indian currency markets have shown a strong correlation with the FII movements over the last few months.
He pointed out between February 10, 2009 and March 5, the net selling by foreign funds in stock markets was worth Rs 5184 crore. There was a direct fallout of the FII selling in stocks in the currency market as Indian rupee which was worth 48.7 to a dollar as of February 10 went down to 52.05 as on March 5.
Similarly, the FIIs purchased shares worth Rs 12,336 crore between April 23 and May 22 which resulted in rupee appreciating from 52.22 to a dollar as of April 23 to 47.19 as on May 22.
Brahmbhatt said between June 5 and July 10, the FIIs sold shares worth Rs 3265 crore and in the same period rupee went down from 46.84 to a dollar to 48.69.
He said if Rs 5000 crore are withdrawn by the FIIs from the stock market, it could trigger a 7 per cent fall in rupee value. And Rs 5000 crore is only 1.6 per cent of the total FII funds in the country.
"We are sitting on a huge currency risk through FII investments," he said, given that the miniscule part of FII money results in massive movement in the currency markets.
Incidentally, the total FII investment in Indian stock market is Rs 2,94,000 Crore as of now which forms only a small part of the total stock market capitalization which stands at about Rs 42,00,000 crore.
The study found that withdrawal of Rs 5,000 crore by foreign funds from the stock market triggered a fall of seven per cent in the Indian rupee against the dollar early this year.
Pramit Brahmbhatt, CEO of Alpari India, a subsidiary of Alpari UK, a global foreign exchange trading company, said the Indian currency markets have shown a strong correlation with the FII movements over the last few months.
He pointed out between February 10, 2009 and March 5, the net selling by foreign funds in stock markets was worth Rs 5184 crore. There was a direct fallout of the FII selling in stocks in the currency market as Indian rupee which was worth 48.7 to a dollar as of February 10 went down to 52.05 as on March 5.
Similarly, the FIIs purchased shares worth Rs 12,336 crore between April 23 and May 22 which resulted in rupee appreciating from 52.22 to a dollar as of April 23 to 47.19 as on May 22.
Brahmbhatt said between June 5 and July 10, the FIIs sold shares worth Rs 3265 crore and in the same period rupee went down from 46.84 to a dollar to 48.69.
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He said if Rs 5000 crore are withdrawn by the FIIs from the stock market, it could trigger a 7 per cent fall in rupee value. And Rs 5000 crore is only 1.6 per cent of the total FII funds in the country.
"We are sitting on a huge currency risk through FII investments," he said, given that the miniscule part of FII money results in massive movement in the currency markets.
Incidentally, the total FII investment in Indian stock market is Rs 2,94,000 Crore as of now which forms only a small part of the total stock market capitalization which stands at about Rs 42,00,000 crore.
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