The sharp depreciation in the
value of the rupee against the dollar has been repeatedly hitting headlines during recent months. The sudden slide that saw the rupee losing over 20 per cent since the beginning of August 2011 from 44.05 to a dollar to 54.2 on December 15, when the Reserve Bank of India stepped in to stem the slide, caught many market players off guard.
The rupee has strengthened slightly since and on January 18 closed at 50.4. Weak domestic economic sentiment coupled with global worries, especially in the euro zone, has once again resulted in investors reaffirming their faith in the dollar as a safe haven compared with perceived
risky investments such as Indian stocks.
The resultant sustained selling by foreign institutional investors (FII) in the Indian market has put immense pressure on the rupee. Between August and December 2011, the period when the rupee dipped sharply, FII outflows were to the tune of Rs 10,894 crore.
On top of this, speculative pressures have added to the strain on the currency. The RBI, which has always been in favour of allowing market forces determine the value of the rupee, could not remain a bystander.
To stem the slide and curb speculation, the central bank announced a couple of measures, including restrictions on forward contracts in the currency, which have had the desired impact, even if only for the time being.
However, the worst may not be over for the rupee given the continued pessimism gripping the domestic economy and the stock market. The view appears to be that the pause may be a temporary one and that the currency might weaken in the days to come and may even test fresh lows.
So what is rupee movement all about and what does it mean to you? Our cover story package on the rupee story tries to untangle the knots. Cutting out theories and jargon, we have tried to tell you in simple terms what moves the rupee and how it impacts you as an investor or as a consumer of products and services to enable you to position yourself and to plan your finances keeping the rupee factor in mind.
Elsewhere in this issue we bring to you the emerging trends in unit-linked insurance plans, including Ulips that claim to have cut costs and charges and health plans that are linked to the market. With the insurance buying season round the corner it should help you understand the new products.
Also, in the third part of our ongoing series on the web, we tell you how to take your business online and how to make it a success. With e-commerce picking up strong momentum, the entrepreneur in you should be able to take advantage of this tool to make some more money.
Sarbajeet K Sen
