Enough of Rupee depreciation, look at exports says economist and the pied piper of emerging markets

Last Updated: Wed, Oct 24, 2018 13:50 hrs

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:

A Tweet from Ajit Ranade explaining how one Rupee rise in currency leads to a extra payment of Rs 12,000 crore.