That aside, it is the recent travails of the global financial markets, triggered by the US subprime crisis and the resultant speculation about the impeding recession in the US economy, that set not only the capital of the wealthy westerners, but also the sovereign funds of oil-exporting countries of all shades on a free flow across the emerging markets, which led to huge portfolio investments in the Indian stock market by FIIs. The consistent impressive performance of the India Inc. that is driven by sound economic fundamentals, such as a huge domestic market, less dependence on exports for its growth and reined-in inflation, have all cumulatively made India a safe destination for investment.
The net result of such copious inflow of capital is: appreciation of rupee by about 12% over the last 10 months. The economic fallout of the rise in the rupee is the reluctant intervention of the Reserve Bank in the currency markets by way of buying up dollars, followed by sterilization of the resultant increase in rupees—all at a substantial cost. Aside of it, there was a hue and cry from businessmen/exporters, particularly those hailing from BPO, KPO, textile industry, etc., over the fall in their profit margins. Mid-cap companies—exporters from both real and services sector—are said to be the worst hit, for they have the least cushion to absorb the sudden volatility in profits. Above it, it is the politicians crying hoarse from the rooftops about job losses. |
