The Rupee devaluation indeed is a hot topic, but it should not worry investors. Thats what investment gurus and even economists seem to be saying.
With the Rupee losing nearly 13% steam against the US greenback, domestic price of commodities such as crude oil and bullion is on the rise. But, Mark Mobius, considered a Guru on emerging markets, has a piece of advice. "It's high time India starts taking advantage of a weaker rupee."
Mobius the founding partner at Mobius Capital Partners referred to as the Pied Piper of Emerging Markets, reasons that a weaker Rupee gives strength to exports. He also hinted that as others remained worried and scrambled on global trade wars, India had a major advantage.
Speaking about the enormous opportunities, he said, "India has a potential to attract overseas investment and it can take advantage of the weak rupee and trade war to grab a bigger share of the exports market."
Speaking to reporters around the sidelines of the two day MorningStar Investment Conference, he added that by accelerating reforms and easing rules for exports, India could take advantage of an ongoing trade war. And, it was imperative that new money be allowed to come in, especially considering the liquidity crisis in infrastructure and banking sectors.
By bringing Manufacturing to the country, especially at a time when the Rupee had been trading weaker, Mobius hinted that investors could be getting a run for their money.
He had high regards for emerging economies such as India and Brazil and called them at the top of the 'pecking order' among emerging markets. Even as most emerging markets had sunk to a bottom, he said "Indian rupee has depreciated and we are pretty much near the bottom."
“With regards to emerging market currencies, he said most currencies are stabilising. “Indian rupee has depreciated and the currency meltdown is nearing its end,” he added. But, being at the bottom gave "better bargains" to investments said the investment guru who quit Franklin Templeton investments to start of his own.
Amid the election year, there was some "uncertainty", but Mobius said that Indian policymakers could benefit by opening a "one-stop shop" for investors. A place to sort all investment related paperwork for investors. His reasoning stems from the premise that he visited market regulator SEBI (Securities and Exchange Board of India) for approvals to let his firm invest in the Indian equities market.
Mobius' thoughts were seconded by economist Ajit Ranade. He said that the country could exploit the export opportunities and stabilise rupee and rein in the current account deficit (CAD).
He was quoted in a media report saying that India's situation was extremely worrying since CAD (Current Account Deficit) could breach the 3% mark this year. Ranade also added that the recent FII outflow had been mainly because of falling rupee and rising oil prices, while US rate hikes also had a role to play.
Given that the US sanctions on November 4 are awaited, Mobius said that a higher import bill could put India’s fiscals at greater risk should crude oil top $ 100 a barrel by early next year.
Here are some other interesting thoughts that one could take away from the conference:
"I think we will probably talk about the incredible improvements that will take place, regarding the ESG issues. There's a whole industry growing around that." @MarkMobiusReal concluding his #Keynote at #MICIN. pic.twitter.com/YUzeaEo5bC— Morningstar India (@in_morningstar) October 23, 2018
"This is a big big change that had taken place in the industry as you know. Most of the new money flowing into funds has been passive money." @MarkMobiusReal in conversation with @rpinkerton at #MICIN.— Morningstar India (@in_morningstar) October 23, 2018
"It looks like an incredible opportunity. With the rupee becoming weaker, exports become a great opportunity, not export commodities but exports in service." @MarkMobiusReal (Founding partner, @MobiusCap) during the #QnA session with @rpinkerton at #MICIN. pic.twitter.com/tqs6NUQEcJ— Morningstar India (@in_morningstar) October 23, 2018
"#Investment philosophy is like a diet plan. On paper, it looks good, but if you follow it for a longer period of time, you will see the benefits." - Concluding remarks by Nimesh Chandan at #MICIN. pic.twitter.com/YrnO0UQbq9— Morningstar India (@in_morningstar) October 23, 2018
"The reason NBFCs works is because they can keep on taking short term loans and this works on the system of trust." @ajit_ranade in conversation with @dhavalkMstar during the QnA session at #MICIN. pic.twitter.com/7SLkJdpSGb— Morningstar India (@in_morningstar) October 23, 2018
A Tweet from Ajit Ranade explaining how one Rupee rise in currency leads to a extra payment of Rs 12,000 crore.
with annual oil import bill of at least $ 120bn, just one rupee slippage from 73 to 74 means extra payment of 12,000 crore (annualized). now imagine this. rupee has fallen from 63.5 on Jan 2, to 74 today, i.e. 11 rupees in 11 months.— Ajit Ranade (@ajit_ranade) October 5, 2018