Trump’s ‘Americans first’ stance to wary off investors, Weaken Rupee

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

 

Debangana Dhar, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Just after few days of Trump’s swearing in as one of the most powerful position in the world, estimations have started flowing in amongst the apprehensions about the global economic turmoil. Trump’s protectionist move might slow down the bull of stock market and can hit the rupee, sending it down by 3% to the greenback. The Indian currency may take a plunge to hit to a fresh low of 70 against the dollar in the next few months, as estimated by the experts. The expectations are indicating towards the soaring of dollars in next six months, as Trump’s ‘Buy American and hire American’ slogan is showing no sign of being muted.

Events such as Brexit and the US presidential election last year have not taken such a heavy toll on the market, as it is predicted to have now and a weakening rupee might result in foreign investors turning away from Indian market. Same trends have been shown by other emerging economies. Japanese yen was down 0.49%, China renminbi 0.18%, Philippines peso 0.17%, South Korean won 0.14%, Singapore dollar 0.13%, Indonesian rupiah 0.08%, China offshore 0.06%. Amidst these uncertainties, the worried Dalal street is looking forward to the upcoming budget to calm down investor sentiments through Government reforms.

Ever since Trump has won the election, the US business confidence has got a boost on the promise of lower tax rate coupled with the impetus to the US economic growth. The bullish equity market based on US funds is convincing global investors and causing an outflow from the emerging markets and weakening the emerging currencies. In India, the protectionist policies may have a sizable impact on the Nifty earnings as nearly 15% of the total revenues of Nifty companies are derived from the direct exports to the US. India can now pin down its hopes of regaining the vigour to a favourable budget. After the initial clouds of demonetization start clearing the way, the foreign investors might pick up the confidence in a more transparent market. The same downward trend of rupee can be exploited by the forex traders to make the most of the situation. Whether it will be on the down side or it will start going up on the roller-coaster ride- depends on how World and Indian watchdogs react to the upcoming challenges.

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