Falling rupee a ticking bomb for companies ? Why?
pooja, Buzzingstocks, james, and 2 others are discussing. Toggle Comments
Rupee is falling because of stalled financial reforms by the government, and problems caused by the opposition, like deregulation of liquified natural gas, fertilizers etc. Also the GAAR allows people to turn black money into white by paying some meager amount of tax. There is corruption that stalls business models long enough to run them dry, litigation procedure that takes years to reach its final stages. All this has made the FII’s (the guys who put money in INDIA) take their money out of India, that is they are now selling the Rs they had here, and are buying $ or putting that money in some other country, either way Rs is being sold, and an oversupply of anything devalues the item.
Now its a ticking bomb, because most companies had taken foreign loans, because the interest rates were low, but now since the rupee is depreciating, they have to pay 54 Rs, to pay back the same 1$, which they had borrowed when 1$ was 44. Now if Rs devalues to 1$=60Rs, companies have to payback 6Rs extra (60-54) to repay the same 1$,and this is not including the interest rate.
If this continues many companies will be filing for bankruptcy which is the time bomb you were referring to.
Hope it helped…
Here its mainly demand and supply game that is going on, because of increasing value of Dollar exporters and IT companies are happily keeping their money in US countries and waiting for Dollar to go up further and make more money.
On the other hand if I am a importer I have imported goods or crude oil from other country I have to make the payments in Dollars and I have to pay the price for that at what ever price its trading in the markets and have to pay a huge price as there are not many sellers (the above parties) to sell their dollars.
So this is the reason why Dollar’s price is shooting up like this.
Foreign Investments into India has reduced …. Also, exports by Indian manufacturers have also reduced due to govt regulations and stuff ….
Read Book on “Art of Stock Investing – Indian Stock Market” @ http://bse2nse.com/archived/3185-book-art-stock-investing-indian-stock-market.html
With the Indian rupee Devaluation some are happy and some are sad.
IT Companies are happy because they got the money from international clients in Dollars and if the prices of dollar will be high it will converted into huge money.
Apart from this Exporters are also very happy because they will also get good money if the dollar will increase.
But in case if Import if the rupee will week then we have to pay more which means huge inflation in India and everything will costly.
Here you can give some points of direct things and indirect things
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