Presently we are looking at the following factors that can affect most to INR in coming months.
Falling Crude oil Prices and its impact on India:
Soft crude oil prices are threatening growth of several oil-producing economies and this can have serious repercussions for India's foreign fund inflows as well as exports.
The recent foreign fund sell-off in equities and decline in rupee's value can be attributed to this constant fall in crude prices. Brent crude has tumbled 48% from its high in June this year to $60 a barrel. Market sentiment was further shaken after the International Energy Agency warned about potential financial defaults by Venezuela and Russia, while slashing crude demand forecast for 2015 to nine lakh barrels per day.
Crude oil prices may remain low for long time and it may erode surplus income of oil-producing economies and it may lead to low capital inflow in our market. Export demand may also come down as global growth is waning. In fact, FII inflows have hit a speed-breaker with only $17 billion investment into Indian equities this year so far, despite markets hitting new highs. India got more than $20 billion in 2013 and $24 billion the year before in FII investments.
Fall in oil import bill and its effect on currency may get set off against fall in exports. Thus we may not see heavy appreciation in currency. In fact, if the trade gap widens then we may see more weakness in rupee.
If incomes of oil producing countries fall rapidly with decreasing oil prices then we may see less investment in our market. Fall in export may further weaken economic fundamentals and depreciate currency...
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