INTERNATIONAL FINANCE

ASSIGNMENT 1 TT RATES FLUCTUTATIONS ANALYSIS FOR THE PERIOD OF 1ST JAN 2012 TO 15TH JAN 2012

SUBMITTED BY ANJULIKA SRIVASTAVA- 2010G40 ROHINI KADGAONKAR - 2010G41 SIDDHARTH PAWAR - 2010G42 ABHISHEK VERMA - 2010G43

About Telegraphic

Transfer TT (Telegraphic Transfer) buying rate indicates the rate at which bank convert foreign inward remittances to INR. TT Selling rate indicates the rate at which the bank sends an outward remittance through telegraphic transfer. When the bank buys 1 USD using Telegraphic Transfer, it pays higher INR compared to buying 1 USD. 1st Jan to 15th Jan 2012, Rupee Vs. USD TT Buying Rate 52.62 52.76 52.64 52.62 52.29 52.27 52.27 52.27 52.35 51.22 51.28 51.28 50.77 50.77 50.77 TT Selling Rate 53.70 53.79 53.70 53.67 53.34 53.32 53.32 53.32 53.50 52.27 52.38 52.34 51.85 51.85 51.85 % Appreciation/Depre ciation (TT buying Rate) (Base Rate - New Rate)/New Rate 0% 0% 0% 0% 1% 0% 0% 0% 0% 2% 0% 0% 1% 0% 0%

Date

1-Jan-12 2-Jan-12 3-Jan-12 4-Jan-12 5-Jan-12 6-Jan-12 7-Jan-12 8-Jan-12 9-Jan-12 10-Jan12 11-Jan12 12-Jan12 13-Jan12 14-Jan12 15-Jan12

** Source - CITI Bank From the above table, we can see that there has been almost no depreciation or appreciation of rupee initially except on 5 th Jan where it

appreciated by 1%. A major change was seen on 10 th Jan where the rupee suddenly appreciated by 2% & again on 13th Jan appreciated by 1%.

Below is the graph showing the trend of TT buying & selling rates during 1st Jan 2012 to 15th Jan 2012.

With the entry into 2012, global manufacturing activity was already subdued, with Euro zones industrial sector suffering its 5 th straight month of declines in December & Asian factories mostly stuck in a rut. The rate of decline of activity in Euro zone factories eased slightly to raise hopes the downturn will not be as severe as feared.

On 2nd Jan- The rupee fell by 17 paise to Rs 53.79 per dollar in early trade on Interbank Foreign Exchange on increased demand fro the US currency importers. On 5th Jan The rupee snapped a two-day rising streak to end weaker on 5 th Jan, on local shares and as nervousness about Europes debt crisis sent the Euro plummeting against the dollar, But, the losses in rupee were limited due to expectations of robust dollar inflow on the back of measure taken by the government & RBI to support growth. On 6th Jan The Indian rupee rose early as some banks sold dollars. On 9th Jan - The rupee suddenly appreciated by 2.2% because of RBI selling of dollars. RBI has acted to stop the erosion of rupee value against the dollar currency. It is very difficult for the Reserve Bank to adjust the value of the currency, the long term solution would be fix the problem in economy and bring the inflation into control. RBI would not allow currency to be higher after certain level because of the exports would get affected like IT companies would suffer if the rupee gets appreciated against the dollar. On 10th Jan The Finance Minister Pranab Mukherjee called it a good sign & held the promise of measure to consolidate the recovery. The figures released by the government showed that strong consumer demand had led to a strong revival in the manufacturing sector which is 75.5% of the overall stock. Manufacturing had contracted by 5.7% in October. But within this, the consumer goods grew by 13.1% with durables rising 11.2% and non-durables as high as 14.8%. On 13th Jan The Indian rupee rose on this day as easing worries over Euro zone funding boosted risk appetite across Asian equities & dollar flows into local debt stayed robust. The rupee had strengthened by nearly 2.6% so far this week with a rise in foreign funds investment interest in local debt. The currency had gained 0.7% last week.

Net inflows into Indian debt so far in January stood at about $2.61 billion, substantially more than the $488.5 million invested in equities. European shares & the single currency rose on 13 th Jan after positive comments on regions outlook from the European Central Bank and the success of Spains bond auction, with attention focused on Italys first debt sale of the year.

The rupee posted its biggest weekly gain in over 2 months as it was aided by robust inflows & positive local shares with dollar demand from oil importers keeping a lid on the rise. During this week, the market was cutting long positions in dollar because of RBI restrictions in place. This rupee recent recovery has largely been aided by continued investment into Indian debt by foreign funds, who must invest by midJanuary to utilize previously won limits.

The Rupee was expected to be seen in the range of 50.20 to 52.20 next week. This table indicates the total equity & debt during this period (1 st Jan 2012- 15th Jan 2012) in India. 12th and 13th Jan the inflow was big by FII as shown in the screenshot below because of which the Rs again appreciated against $.

Dates Gross Purchase

15-Jan-12 13-Jan-12 12-Jan-12 11-Jan-12 10-Jan-12 09-Jan-12 06-Jan-12 05-Jan-12 04-Jan-12 03-Jan-12 02-Jan-12 7,863.80 2,526.30 2,526.80 2,629.60 2,783.10 1,789.10 1,851.00 2,248.40 1,840.30 1,356.50 472.3

Equity (R s.crore) Net Purchase/Sales

2,185.30 364.6 525.5 497.5 405.1 12.4 25.1 549.2 257.2 325.6 -39.1

Debt (R s. crore) Gross Purchase

713.9 2,672.60 3,091.60 2,246.00 1,438.00 818.2 2,271.40 1,338.50 3,246.30 2,191.20 1,190.90

Gross Sales
5,678.50 2,161.70 2,001.30 2,132.10 2,378.00 1,776.70 1,825.90 1,699.20 1,583.10 1,030.90 511.4

Gross Sales
1,401.00 450.7 298.2 645.6 860.3 461.1 181.7 237.9 310.1 1,013.60 104.9

Net Purchase/ Sales

-687.1 2,221.90 2,793.40 1,600.40 577.7 357.1 2,089.70 1,100.60 2,936.20 1,177.60 1,086.00

Total

27,887.20

22,778.80

5,108.40

21,218.60

5,965.10

15,253.50

Data published by Sebi on Friday, which is updated for all trades done till the previous working day (in this case Wednesday), showed a net FII inflow of $1,779 million. And institutional trading data on the BSE showed Friday's net inflow figure at Rs 1,240 crore, which translates to $252 million. The aggregate of the two is slightly over the $2 billion mark. It is said that the current rally in global markets, some of which are at five-and-half-month high, also boosted the foreign flows. Buoyed by sustained FII inflows, the stock market barometer Sensex also gained over 11% in January. The index finished at 17,193.55 on 31 January, the last trading session of the month, gaining 330 points from its last close.