Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

The Chinese are cautious on the yuan
Tue, 16 Mar Pre-Open

The Chinese exchange rate has once again become a matter of contention. It is well documented that the Chinese follow an artificial exchange rate policy wherein the yuan has been pegged to the US dollar. The US has been crying foul for quite some time now. And now as the US continues to be mired in a slump, the Chinese forex policy is once again taking the centrestage.

Noted economist Nouriel Roubini is of the view that China will limit the yuan's appreciation to 4% during the next 12 months because of a 'super cautious' outlook on the global economy. According to him, this appreciation will be less than what they did in 2005 when everything was going on smoothly. To tackle the crisis, the Chinese banks have been indiscriminate in their lending especially to real estate players. Plus, the stockmarkets have also zoomed to unprecedented levels. Therefore, possible inflation in the dragon nation has emerged as a key concern. However, Roubini has pointed out that what is disconcerting is the export-led growth model, a weak currency and lower interest rates. What is more, it is not possible to change China's business model overnight and it could take 3-5 years for a meaningful change to take place.

From a Chinese point of view, the case for appreciation does not look very strong. For starters a large chunk of the country's exports is to the developed world notably the US. In the latter, consumption and demand has not really picked up as Americans are wary of loosening their purse strings given that the job scenario is shaky. This means that an appreciation of the Chinese yuan would make Chinese goods more expensive to Americans. This would then strengthen the latter's case for not consuming more. China's central bank, in the meanwhile, has stated that although such mechanism will be abandoned sooner or later, they intend to be very cautious with respect to the timing. The US, for sure, cannot expect China to bow down to its wishes anytime soon!

Indian government has been on a spending spree

There is a big difference between what happens in one year and in ten years. Take government expenditure for example. In FY11, the government's expenditure on subsidies, grants to states and union territories, grants to foreign governments, defence and pension is not expected to rise by much, But in the past ten years, these have grown in the region of 200% or more. This coupled with the stimulus measures that were injected into the Indian economy meant that the fiscal deficit will rise to 6.9% of GDP in FY10. However, in the recent Budget, the government unveiled a roadmap for reducing India's fiscal deficit over the next few years. As against an estimated figure of 6.9% and 5.5% of GDP in FY10 and FY11 respectively, the rolling targets for fiscal deficit were pegged at 4.8% and 4.1% for FY12 and FY13 respectively. What the government needs to ensure, however, is that the spending on critical sectors such as agriculture, education and healthcare does not get curtailed. But that could prove to be easier said than done.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "The Chinese are cautious on the yuan". Click here!

  

Stock Market Updates

GUJ. STATE PETRONET Share Price Up by 5%; BSE 500 Index Up 1.4% (Today's Market)

Mar 2, 2021 03:31 PM

GUJ. STATE PETRONET share price is trading up by 5% and its current market price is Rs 262. The BSE 500 is up by 1.4%. The top gainers in the BSE 500 Index are GUJ. STATE PETRONET (up 5.2%) and GSK CONSUMER (up 5.1%). The top losers are BAYER CROPSCIENCE and LAURUS LABS.

GUJARAT PIPAVAV PORT Share Price Up by 12%; BSE REALTY Index Up 0.8% (Today's Market)

Mar 2, 2021 03:23 PM

GUJARAT PIPAVAV PORT share price is trading up by 12% and its current market price is Rs 114. The BSE REALTY is up by 0.8%. The top gainers in the BSE REALTY Index is GUJARAT PIPAVAV PORT (up 12.5%). The top losers are PRESTIGE ESTATES and PHOENIX MILL (down 0.2%).

STRIDES PHARMA SCIENCE Share Price Up by 5%; BSE HEALTHCARE Index Up 1.1% (Today's Market)

Mar 2, 2021 03:23 PM

STRIDES PHARMA SCIENCE share price is trading up by 5% and its current market price is Rs 878. The BSE HEALTHCARE is up by 1.1%. The top gainers in the BSE HEALTHCARE Index is STRIDES PHARMA SCIENCE (up 5.1%). The top losers are AJANTA PHARMA (down 0.4%) and CAPLIN POINT (down 0.4%).

JAGRAN PRAKASHAN Share Price Down by 7%; BSE 500 Index Up 1.3% (Today's Market)

Mar 2, 2021 03:23 PM

JAGRAN PRAKASHAN share price is trading down by 7% and its current market price is Rs 63. The BSE 500 is up by 1.3%. The top gainers in the BSE 500 Index are SYMPHONY (up 20.0%) and SHIPPING CORP (up 20.0%). The top losers is JAGRAN PRAKASHAN (down 7.4%)..

JK LAKSHMI CEMENT Share Price Up by 11%; BSE 500 Index Up 1.0% (Today's Market)

Mar 2, 2021 03:15 PM

JK LAKSHMI CEMENT share price is trading up by 11% and its current market price is Rs 438. The BSE 500 is up by 1.0%. The top gainers in the BSE 500 Index are JK LAKSHMI CEMENT (up 11.0%) and TTK PRESTIGE (up 11.1%). The top losers are CROMPTON GREAVES CONSUMER ELEC. and RAYMOND .

Sensex Trades Over 200 Points Higher; Dow Futures Down by 90 Points (Today's Market)

Mar 2, 2021 12:30 pm

BSE Sensex is trading up by 209 points, while the NSE Nifty is trading up by 76 points.

View More Indian Share Market News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps(Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market(Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

I Believe the Investment of the Year Will Be...

Feb 19, 2021

In this episode, ace trader Brijesh Bhatia talks to us about the best investments of 2021, his profitable trading system, and much more.

The Hidden Tesla in My Great Indian Wealth Project(Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Mar 2, 2021 (Close)

MARKET STATS