Indian Rupee Might Be Heading For a Slow Train Wreck

The downward spiral in the Indian rupee poses a significant threat to the country’s equity market, according to one strategist, who warns that continued weakness in the currency could prompt foreign investors to flee domestic stocks.
The weak rupee has depreciated 10.8 percent against the U.S. dollar this year, making investment returns less attractive for foreign investors, who are a major driving force in the market.
“When an emerging market currency does not respond positively to policy liquidity tightening, the market is in deep trouble. Therefore, further price weakness in the currency could plausibly drive further weakness in the equity market,” said Nicholas Ferres, investment director, global asset allocation at Eastspring Investments, referring to the Reserve Bank of India’s recent measures to tighten liquidity in order to make it more difficult to speculate against the currency.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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