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Rupee, Sensex and India: too fast too furious?

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I was talking to an American friend of mine yesterday about India. He mentioned something that really intrigued me. He said: ’India is growing too fast and furious, it is not good. It can boomerang India back where it all started’. Although we could not have discussion at length, he cited that India is just not ready for this kind of growth.

By the way, he is an investment analyst on Wall Street and follows Indian market closely, so his saying carries some weight.

Indian growth graph

Long after he hung up the phone, I was still thinking if this tremendous Indian growth is headed for the doomsday.

The harder I thought, the more I am convinced that the case is exactly opposite. This growth is not heading towards doom, but towards new peak. Some of the readers may call me partial, but India has got most basics right, except Infrastructure.

And even in case of infrastructure, there is so much of pressure put on Indian Government now by various business lobbies that it cannot help but improve. I recently read that next 5 year plan has double the budget as compared to previous year on Infrastructure spending.

Look at some of the highlights:

  1. Indian Stock market has been scaling new peaks literally every month. There have been 5 record single day trading sessions in this year alone including the one we had yesterday that shot up BSE by more than 600 points.
  2. The rise in Indian market is partly due to on millions billions of dollars that Foreign Institutional Investors have poured over last few months. The amount of FII money currently in Indian market today is more than ever.
  3. Indian Rupee has appreciated a lot. Yesterday it touched the 9 year mark against dollar of Rs. 39.88. Market pundits are predicting that it should breach Rs. 39 by year end. Although, appreciation of rupees has its own plus and minuses, a common Indian man is much richer than he was earlier.
  4. Indian middle class population is growing at breath neck pace. The growth in salaries of these middle class consumers make them attractive to companies worldwide, making a beeline to enter India. Add to that, India has one of the largest English population which makes them attractive employees to MNCs abroad.
  5. The tremendous growth in Auto, Retail, aviation, telecom, real-estate and host of other sectors.
  6. The Indian economy has scaled new heights and became a trillion dollar economy.

There are many more factors, but I have listed down whatever I had at top of my head.

Yes, India is growing too fast and furious, and I am confident that for atleast a decade India will keep growing at the same pace!

Would be interesting to know readers views.

  1. […] stock market and Rupee growth has been fast and furious. The fall seems to come even […]

  2. Deepak says

    We know that stock market is now in a bad condition, people invested at the time of 19000-20000 points are at great loss. We should play our cards very carefully. Never take things for granted always be careful in investing, we should invest in different sources so our risk factors will be less, we should plan our investment according to our income, never invest by taking huge loans we will land up in big problems at these time of markets. Always we should have liquid cash which is sufficient to lead a normal lime at least for 6-8 months at the time of crises. We should cut down on unnecessary expenses try to clear our loans as early as possible avoid taking unwanted commitments.
    It is always said
    TO MAKE MONY IS VERY TUFF BUT TO LOOS IT IS VERY EASY

  3. Satish says

    I think your WSJ friend is right about his assessment. The growth in stock market is due to foreign investor pumping dollars into the market. I don’t think any country can grow at that pace. It is all news media that is causing this hype to help the investors make money. Now I heard all the foreign investors pulled all their money as soon as govt declared a new rule for them to declare all their investments. The stock market went down to 15000 points in no time.

    Basic rule… What goes up too fast has to come down too fast.

  4. Arjun says

    I need you to revert with an affirmative for a request of mine to use a statement you have quoted in this article. Awaiting reply. Also if its not too much to ask, then the name of the Wall Street Investment analyst?

  5. Soham Das says

    Hi,

    I would agree more with your WSJ friend rather than you :P… but yeah, I dont think it will be a back to square one thing, but let me rehash a few things,
    1. Apart from a strong educated middle class backbone, we effectively have nil, things to boast about. Infrastructure sucks, poverty level high, inflation high, corruption still rampant[what if media stopped talking about it] and bureaucracy still rules the roost[ ask the guys who want to startup, a one week company registration thingie in US takes 60 working days out here]

    2. Rupee has been appreciating, yes! I agree but because of the falling dollar! Euro couldnt show much,and yeah Yen is rising [thats bad! for Indian business]

    3. The real money maker can be KPO oriented manufacturing, thats where the mulla is, and unfortunately we are still in that mom-and-pop service industry.

  6. Perex says

    Your analysis is probably correct. Indian market is still in its early stages. Financial analysts tend to sensationalise data info. that sometimes it’s best not to take notice of them.

  7. Jolsna says

    Ya i agree its thinking on extremes. Well, we are a developing country and everyone is ballistic over the fast growth and the pace…

  8. vj says

    Interesting idea… although you can’t think in extremes when it comes to the economy. All sorts of wild things happen when we least expect it! A couple of my American business friends from India Web 2.0 Newspointed me to this article to get my opinion… I think it’s an interesting point… although you can’t think in extremes when it comes to the economy. All sorts of wild things happen when we least expect it! there’s going to be a heated debate tonight!

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