At 39.285 for 1 US dollar, Rupee is at 10 year high. I think dollar will continue to fall against rupee for next year. Why do I think so? For the following reasons:
- Fed in US has very strongly indicated that it will continue to cut rates in US. This will accelerate the flight of money from US to places where investors can get better returns (i.e. where interest rates are higher).
- Indian economy is doing very well and most of the business people and government officials are very upbeat about continued strong economic growth. On the other hand US economy is heading towards a recession. This is causing lots of people to move money from US to India. This is getting reflected in Indian stock market. While US market fell heavily in last two weeks, Indian market is defying all global indices and reaching record highs everyday. Note Exchange rate is all about demand and supply. More dollar move in to India, more it will depreciate.
- Some very large IPOs (ex Reliance Power, OIL, ICICI subsidiaries, Wockhardt Hospital) are scheduled for next year. This will cause further investment from FIIs in India.
- Real Estate prices are going up in India. Many NRIs want to maintain roots in India or want to move back to India in future. These NRIs are buying real estate in India in record numbers either because they think it is great investment or because of fear that it will be out of their budget very soon.
I am very pessimistic about dollar. In this environment, I think it is wise to move some percentage of assets to India and invest there. I would love to hear what other NRIs are doing?
