09-25-2008, 10:11 AM
<b>India Central Bank May Cap Rupee Drop, Former Panel Member Says</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Sept. 25 (Bloomberg) -- India may cap rupee losses at between 46 and 47 a dollar as further declines will strain finances of state-owned refiners reeling from a rebound in oil prices, according to a former member of a central bank panel.
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Overseas investors have sold $8.8 billion more Indian shares than they bought this year, causing a 14.2 percent slide in the rupee that was the second-worst performance among the 10 most-active Asian currencies excluding the yen.
The current-account deficit, the shortfall in trade and investment flows, widened to a record $17.4 billion in the financial year ended March 31, from $9.8 billion the previous year, central bank data show.
Oil Subsidies
<b>Oil subsidies have climbed to $42.5 billion </b>even as India raised fuel prices twice this year, according to the central bank. Indian Oil Corp., the country's biggest refiner, reported a 72 percent drop in profit in the quarter ended June 30, while smaller rivals Bharat Petroleum Corp. and Hindustan Petroleum Corp. reported losses. Crude oil in New York has risen almost 19 percent from a seven-month low touched on Sept. 16.
``Oil companies are finding it extremely difficult to finance even their working capital,'' Rajwade said. Central bank intervention policy will ``keep in mind their finances.''
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The central bank may refrain from raising rupee interest rates because the government would pay a political price with elections due in seven months, Rajwade said.
<b>Social disorder may discourage overseas funds from putting money into India, he said.</b> A chief executive of a local unit of an Italian company was bludgeoned to death this week near New Delhi by workers who were fired by the factory.
Rupee ``volatility is rising,'' Rajwade said. ``I am advising my clients to pay a fee and buy options'' to hedge their risks.
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Overseas investors have sold $8.8 billion more Indian shares than they bought this year, causing a 14.2 percent slide in the rupee that was the second-worst performance among the 10 most-active Asian currencies excluding the yen.
The current-account deficit, the shortfall in trade and investment flows, widened to a record $17.4 billion in the financial year ended March 31, from $9.8 billion the previous year, central bank data show.
Oil Subsidies
<b>Oil subsidies have climbed to $42.5 billion </b>even as India raised fuel prices twice this year, according to the central bank. Indian Oil Corp., the country's biggest refiner, reported a 72 percent drop in profit in the quarter ended June 30, while smaller rivals Bharat Petroleum Corp. and Hindustan Petroleum Corp. reported losses. Crude oil in New York has risen almost 19 percent from a seven-month low touched on Sept. 16.
``Oil companies are finding it extremely difficult to finance even their working capital,'' Rajwade said. Central bank intervention policy will ``keep in mind their finances.''
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The central bank may refrain from raising rupee interest rates because the government would pay a political price with elections due in seven months, Rajwade said.
<b>Social disorder may discourage overseas funds from putting money into India, he said.</b> A chief executive of a local unit of an Italian company was bludgeoned to death this week near New Delhi by workers who were fired by the factory.
Rupee ``volatility is rising,'' Rajwade said. ``I am advising my clients to pay a fee and buy options'' to hedge their risks.
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