Last week the markets had a roller coaster ride and extended their losses for the second week after the rupee hit a fresh low of 72.9 against the dollar.
Negative global market cues and worries of India’s high current account deficit also impacted sentiment. The government tried to pacify investors by announcing five point plan on Friday to control the current account deficit and fight the rupee’s volatility – scrapping of withholding tax on masala bonds, easing ECB access, removal of exposure limit for foreign portfolio investors’ corporate bond portfolio and measures to cut down “non-necessary” imports.
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On the macro-economic front, IIP growth fell to 6.6% in July compared to 6.9% in June and retail inflation fell to 3.69% in August, the lowest in 10 months, driven mostly by declining food and beverages component.
Here are the global and national events that are likely to impact economy and businesses this week.
Rupee Vs Dollar and fuel prices
The rising cost of domestic fuel as a result of the falling rupee will have an impact on the balance of payment in the coming months and the economic indicators. In the last one month, petrol and diesel prices in Delhi have risen by Rs 4.86 and 4.92 per litre.
The impact of the falling rupee will depend on issues such as a company’s reliance on exports, its cost base and exposure to pricing on international markets.
Escalation of US and China Trade war
Donald Trump is expected to proceed with new tariffs on about $200 billion of Chinese products. The tariff level will probably be about 10%, The Wall Street Journal reported, below the 25%, US had been said to be considering. The WSJ also reported that China may decline to attend trade talks due next week as Beijing won’t negotiate under threat.
States to Miss FY19 Fiscal Targets
Funding of farm loan waivers, poll-related spending and other populist measures are likely to ensure that states are set to miss their fiscal consolidation targets budgeted at the beginning of the year, says a report by ICRA.
Other events
- The Bank of Japan to hold its policy meeting.
- South Korean President Moon Jae-in to visit Pyongyang for a summit with Kim Jong Un Tuesday.