RD Burman composed most suitable songs for Indian stock markets, when he did not even know what stock is. His memorable song Chingari koi bhadke, to sawan aag bujaye; Sawan jo aag lagaye, to use kaun bujaye
SEBI was supposed to monitor the Indian Stock market, not money market. If there is more dollar inflow which causes the Rupee to rise, it was not SEBI problem. By deciding to control money flow in the form restrictions on P-Notes, SEBI overstepped its authority and caused billions of rupees of marketcap wiped out in just under 10 minutes.
India has not attracted even US$ 25 Billions of foreign money as yet, and China has been attracting over US$ 100 to 150 billions per year for over 7 to 8 years in a row. Still, China never complained about the inward money flow, and on the contrary was encouraging more and more spreading its success stories.
And look at our Finance Minister who said
QUOTE Finance Minister P Chidambaram said on Wednesday proposals to moderate portfolio investment by foreign investors were part of a series of steps to moderate capital inflows.
UNQUOTE
Source Economic Times Stock curbs to moderate capital inflows: FM
17 Oct, 2007, 1105 hrs IST, AGENCIES
When the whole world wants to invest in India, the Government is acting just opposite.
Reason, higher money flow causes Rupee to rise (and Ministers holding overseas in Swiss banks go down in value Rupee terms). The primary concern of FM and RBI is to cause the rupee weaker. What for?
Oil is trading at US$ 87. Higher rupee means less cost for gas, energy, power etc which lowers the cost and increase the productivity. However, both RBI and FM go on talking about effect on exports and forget the beneficial effect on imports.
India never saw lower gas/petrol prices. Even when the oil prices dropped to US$ 9/barrel, India never saw prices below Rs 29/litre. No one complains about their rising currency, except third world countries like India. Euro rose from $0.84 to $ 1.43 now or over 70%, yet they never complained. For them, oil prices did not hurt them that much because of rising currency. So also applied to GBP and Canadian dollar which came to parity to be followed by Aussie dollar which is in nineties and soon reach to parity.
India has debt of over US$ 120 Billions. When Rupee was at 48, the debt was Rs 576,000 crores (Equivalent of US$ 120 Billions@48). Now that when the Rupee is at 39.35, the same debt in Indian Rupee terms is 474,000 Crores or about Rs 100,000 crores cheaper or US$ 25 Billions equivalent.
If India has to earn Rs 100,000 crores out of exports, and presuming that profit margin on exports is 10%, it will have to clock the exports of 1,000,000 crores. Does India has capacity to export that much? Does it have that much resource or exportable commodity or manufacturing capacity?
Rupee should have been around Rs 31 if RBI had stopped intervening in the money market? Where is the free money market? If there is a demand for stocks, the stocks rises; similarly if there is a demand of Rupee, it should rise as well in free market. Why RBIs intervention?
When Rupee was at 48, Thai Baht was 54 today Rs at just 39 whereas Thai Baht is 31 Tell me which is stronger economy Thailand or India? Which is fancied more Bangkok or Bombay?
RBI intervened number of times, and has bought over US$ 60 Billions in last 2 years in off market transactions. It has lost about 14% on average due to Rupees rise or about US$ 9 Billions or about Rs 36000 crores in such sterilization operation.
RBI is one of the most destructive and inefficient financial institution in India. It also defrauded in collusion with SEBI, NSE and BSE in case Global Trust Bank, when there were foreign investors to invest over Rs 1500 crores, and gave away entire bank to Oriental Bank free. All shareholders of GTB got nothing. OBC recovered over Rs 900 crores in just under one year where that money has gone why GTB shareholders were not compensated. As per the original scheme on GTB, there was 12 years period for distribution of assets if that was the case, why did SEBI asked all depositories to write off the GTB shares from books?
GTBs main assets were shares which have gone up nearly 4 times, which would have made the stock Rs 300 at least. Considering 120 crores of shares outstanding, the total loss to investors is 120 x 300 = Rs 36,000 crores. These investors losses were all caused by RBI and SEBI when they should have been protectorate.
I have no hesitation to say that only Crooks and Scoundrels are manning and managing the affairs of RBI and SEBI and they are still given elated status. When will the investors and general public learn what is right and wrong for them?
