? Cool Title, but what’s the news?
The government’s rupee depreciation arresting measures announced Friday may not drive fund inflows and are a negative from a longer term perspective as they increase short term debt, a HDFC Bank report has said.
? Okay, but what does it mean?
Increase in short term external commercial borrowings or foreign institutional investor exposure “could lead to further worsening of vulnerability ratios and the global investors might actually take this negatively”, the report warned.
“These measures are better suited when the sentiment in the global market is positive towards emerging markets and, in general, when it is relatively easy for emerging market corporates to raise money abroad,” the note said.
? Why should I care?
The government measures will have a sentimental impact on the market and the rupee trajectory “might not see a full reversal of the appreciation move of the last couple of days”
“We see this as potential negative for the currency beyond the very near term,” the report said.
Source: Business Standard