Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Market Commentary

| More

NRI deposits highest since FY14 - Acuité Ratings

Posted On: 2018-10-31 09:14:25

Acuité Ratings expects a significant build-up of NRI deposits in the current financial year in the backdrop of a significant depreciation in the rupee vis--vis the dollar. In the first 5 months of FY19, the net inflows of NRI deposits stood at USD 5.7 billion as compared to just USD 0.5 billion in the corresponding period of previous year. Given that the major proportion of NRI deposits originate from the Middle East and the oil prices have been on an upswing in addition to the weakness in rupee, we believe that the net inflow of these deposits may touch USD 20.0 billion in the current year. This will partly help to bridge India's current account deficit which is expected to exceed USD 70.0 billion in FY19. Nevertheless, structural measures may need to be taken to improve our trade balance and arrest the increasing trend in the current account deficit (CAD).

A study by Acuité Ratings indicates that over the 5-year period 2014-18, the net inflows of NRI deposits have been a significant 46% of current account deficit. It has also been observed that there is a healthy correlation between oil prices and NRI deposits (correlation coefficient at 0.65) and any spurt in oil prices pushes up the flows of such deposits. These deposits offer an attractive return on dollar deposits as compared to that in foreign nations while allowing a repatriation of its proceeds. A substantial part of these deposits also accrues from the diaspora in the OPEC nations where disposable incomes also rise during a cyclical upturn in oil prices. Acuité's analysis further reveals that there is a strong correlation between net remittances and NRI deposits flows, both showing good momentum during a phase of higher oil prices and pressures on the rupee. This to an extent, acts as a natural hedge against any sharp erosion in the value of the rupee during periods of high volatility in global financial markets.

The government and RBI have taken measures in the past to attract a higher quantum of NRI deposits. However, any sharp upsurge in such deposits over a short period may not be necessarily favourable over the longer term as these deposits are repatriable and can therefore lead to sudden currency outflows in future periods. While regular NRI deposit flows support to maintain a healthy capital account balance, these flows are not a solution to the fundamental weaknesses in India's current account.

What can help at this stage is to adopt structural measures to limit the extent of current account deficit which is expected to exceed 2.5% of India's GDP in the current year. India's trade deficit has sharply risen to USD 160.0 billion in FY18 and is likely to rise further in FY19 unless steps are taken to boost India's exports. The country is expected to have a healthy production of food grains and other agricultural crops in both the kharif and the rabi seasons which presents opportunities to increase our agricultural exports particularly to nations such as China. India has a trade surplus in agriculture, but the extent of that surplus has dwindled from USD 27.2 billion in FY14 to USD 13.4 billion in FY18. Given the trade wars between US and China, there is a significant potential to increase the exports of agricultural products such as cotton, soyabean and corn to China. The other measures to stem the trade deficit is to reduce the extent of commodity imports such as coal to the extent possible through a step-up in investments in coal mining and transportation infrastructure.

The Government of India has taken a few proactive steps in addressing these objectives with initiatives such as exclusive agro export zones as well as related logistical improvements. In the longer term, it is important to make the Indian economy resilient to commodity volatility that continues to haunt the external sector. A higher value addition in the export content along with de-dollarization of imports are necessary milestones in that regard.

Source: Equity Bulls

Click here to send ur comments or to

Other Headlines:

Seems a breather due to underperformance of few heavyweights: Angel Broking

Market will crucially watch for Manufacturing PMI, Infrastructure output's numbers & ICICI bank's result : Epic Research

All eyes on 10200 now:Angel Broking

Market Strategies for Tuesday, October 16, 2018 from Share India Securities Ltd

Quarterly number of crucial companies may have a larger impact on specific factors : Epic Research

It's a bear momentum - Market crash - Epic Research

Thursday morning wiped off Rs 4 lakh crore of investor wealth within 5 minutes

Expect further bounce back in midcap universe: Angel Broking

No respect for 200 day SMA as well: Angel Broking

SBI Ecowrap - Excise cut most welcome, states are already cutting in tandem: Short term steps by RBI now a must for currency market stability

RBI's Policy decision will be crucial for coming week market : Epic Research

Expectation from RBI Monetary Policy - Karan Mehrishi, Lead Economist at Acuité Ratings and Research

Nifty to continue its downtrend for lower targets of 10600 - 10700 : Epic Research

Market View - Mr. Abhijeet Dey - BNP Paribas Mutual Fund

Nifty needs to close past 11340 to show some corrective upside

All eyes will be on crude oil movement and INR in the coming week : Epic Research

After a decline, appearance of Hammer pattern indicates a trend reversal

Nifty recovered some ground, Metal universe poised for strong move: Angel Broking

Nifty will consolidate next week before any fresh breakout on either side defining the short term trend : Epic Research

Bullish Hammer activated, further recovery on cards: Angel Broking

Oversold levels may allow for further bounce towards 11500-11540

Smart tail-end recovery looks encouraging, 'Metal' to continue outperformance: Angel Broking

Nifty has formed big red candle stick pattern on daily chart - Equity99

Still just a profit booking and not a trend reversal: Angel Broking

Market will look for IIP and Inflation data in Mid September : Epic Research

The index is likely to enter into a corrective trend - Market Strategy Aug 31, 2018 - Share India Securities Ltd

No obstacle seen before 11900, do watch out for 'Metal' space: Angel Broking

Further liberalization can help double rural income faster in India - Rajiv Ranjan Singh

Weekly Market Outlook - Rahul Sharma, Senior Research Analyst, Equity99

Floods to have a significant impact on the Kerala economy - Acuité Ratings & Research

Nifty expects to range between 11430 - 11600 for coming week market : Epic Research

Large caps and blue chips leading momentum for coming week market : Epic Research

Nifty has a strong support for 11295-11235 for coming week - Equity99

Keep using declines, further legs to unfold: Angel Broking

Economy Update: Monetary Policy - Kotak

Nifty eying 11400 - 11500, keep participating without any hesitation: Angel Broking

RBI policy leading the coming week market : Epic Research

Nifty enters uncharted territory, still long way to go: Angel Broking

Hitting record highs is merely a formality now: Angel Broking

Heavyweights results will drive market for next week : Epic Research

Market gearing up for new highs: Angel Broking

Midcap index is in process of bottoming out: Angel Broking

Expect choppy moves in index, better to continue with stock centric approach: Angel Broking

Crude price and its impact will drive coming week market - Epic Research

Benchmarks once again stuck in a range: Angel Broking

Metals, real estate and fertilizers to perform well in July series : Epic Research

Majority of longs have been lightened - The Rollover Report: Angel Broking

Markets in a corridor of uncertainty: Angel Broking

10650 - Probably a trend deciding level: Angel Broking

All's well that ends well: Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018