-- Posted Monday, 10 October 2011 | | Disqus
US – Indian Rupee (USD/INR) is trading at 49.09. In six months we expect USD/INR to fall to Rs.47.30 and Rs.45.00. For the moment the fundamentals of Indian economy are mildly weak on the back of continued high food price inflation, low manufacturing sector growth and a government backed by scams and its failure to take tough measures.
The arbitrage
A non resident Indian (NRI), Overseas investment company or any one who is able to send and receive US dollars to and from India can send the US dollar to India at the prevailing prices à investment the converted Indian rupees in Indian bank deposit and take the same amount six months later and make a gain of 8.70%
The procedure
1st October 2011: Suppose “X” an NRI brings in $1000 to India and converts the same to Rs.49700 Indian rupees.
5th October 2011: Invest the Rs.49700 in bank fixed deposit for a period of 6 months (180 days)@7% annualized
5th April 2012: Interest received on Rs.4970: Rs.1739. Total amount: Rs51439
US dollar Indian rupee rate as on 6th April: Rs.47.30 (expected rate)
Total converted US dollars (from Indian rupees) $1087
Arbitrage Gain: Rs.8.70%
The risks to the above investment
If the US dollar – Indian rupee (USD/INR) weakens to 50.00 there will be an investment loss. The Indian exchange rate (Usd/Inr) is dependent more on foreign portfolio flows in the short term. There has been a net outflow this year. If there continues to be net foreign portfolio outflows from India then USD/INR can weaken to 53.00 on a break of 50.30.
Technically speaking 50.30 is the key resistance for the USD/INR and this prices could have been breached this month (In October 2011) but for reserve bank of India support.
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared By Chintan Karnani. Website www.insigniaconsultants.in
NOTES TO THE ABOVE REPORT
PLEASE NOTE: HOLDS MEANS HOLDS ON DAILY CLOSING BASIS
PLEASE USE APPROPRIATE STOP LOSSES ON INTRA DAY TRADES TO LIMIT LOSSES.
Customer care: 9811139549/9311139549
You can also mail your queries at chintan@insigniaindia.com
-- Posted Monday, 10 October 2011 | Digg This Article
| Source: GoldSeek.com
