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Dollar-Ruppes relationship in Indian Stock Market, How to use it for make profit?

Sunday, December 26, 2010 | | |


Most of Investor when near to study Technical analysis, then the arises question about various currencies and their effect of Indian stock market. It obvious, we are cautious and want to know everything which affect to our home market. That is very clear that currencies are affect each other market. Currency of one country represent his market condition truely (There are some exception, some country appreciate their currency as well some dominant their own currency. Still I like to say that both of those artificial moves will prove as dangerous to their own currency. ) My point is that currency try to indicate economic health of that country. You can check out total global economic health with major currencies. Just list your desired and market leader currencies to make your own index.

Question arises in mind in Initial days of my study, " Are Dollar really affect to Indian stock market?" Dollar is powerful currency in world. You can say it global currency ( Even though big fall in global economies as well as U.S. economy, still Dollar retain it's position.) Yen is following dollar to dethroned, but it not possible. In coming future it will be possible. EURO also try to dethroned, it is not become truth due to Ireland, Spain are shaken EURO. DOLLAR is still global currency.

After lot on investigation and analysis I am try to put Dollar-Rupees relation ship in-front of you. So it will help you. This is not for only Dollar . You can apply this theory same way to other major currencies also. I take Dollar be because it is global currency in now days. In future you can use it for YEN also.

How foreign investor use currency as double weapon to invests and harvest double profit from emerging economies?

FII and FDI both makes their investment moves accordingly the Dollar-rupees relation. They are try to gain double profit in their moves. One in field where they invested money and second is at difference in their Dollar and Rupees difference. So they are able to draw profit on double end. That's not magic. It is real game of number. Don't believe on me. Just go through the following example.
example: (On real data)

 If FII had invested money in India year 2002 then average rate of Dollar-Rupees rate is near 47. SO if FII or FDI invested 1 Dollar, they had get 47 rupees for exchange. Now they invested 47 Rupees in Indian stock market, that time NIFTY is nearly 1000.

Now they are ready cut ripe fruits in 2008 where Nifty on 6000 mark.
How they get double profit opportunity;

1) FDI or FII get benefit of Indian stock market. Indian stock market increase five fold from 1000-6000.

2) Just look at USD-INR graph, you should surprise. In 2008 dollar is 40. That mean if FII or FDI want to withdraw their money
from Indian Stock market. Then they can buy 1 dollar by spending only 40 rupees in 2008. They get benefit of money exchange.
Simple math 47-40=7 shows profit for 1 dollar, beside they able to earn profit due to good growth in Indian stock market.

I think this illustration is enough. You can now understand how to analyse and use USD-INR relationship while you think for investment in our stock market. You should found it useful in long term as well as short term investment.

India now started currency exchange. You would like to checked detailed HERE.

If you have queries regarding this topic, feel free to ask me.

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