Falling rupee upsets falling oil prices

The rupee is falling almost as fast as the oil prices are falling. In the past 6 months, rupee has fallen by 12% against the dollar, effectively making oil 12% more expensive for India because oil is priced in dollar. So dont get too excited by the oil fall, unless the rupee stops falling. Lets fasten our seat belts for possibly more bad news on inflation triggered by the falling rupee in the coming months.

Falling rupee is also bad for the markets, or rather for investors. A low rupee value discourages foreign inflow of cash into Indian stock markets.

Despite this, I have observed a large call build up yesterday. The nifty is likely to be in for a short rally today in the absence of any more shaking news. Thats what the put call outlook tells me.

Sep 11, 2008

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