Indian Economy – Review and Analysis, September 2009
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The month of September bought quite a lot of good news for India. Equity markets zoomed with renewed optimism and exchange rate strengthened. Among other broad based indicators, Index of Industrial Production continued its good growth. Exports and imports which were declining sharply saw a decline in the rate of de-growth and consequently trade balance improved. Monsoon and inflation are the factors which have contained the good news. Monsoon this year has been 23% below normal, forcing the country to face worse drought conditions since 1972. Crop sowing has been affected and this leads us to our second errant factor which is inflation. Food prices have already been high and owing to poor monsoons prices may inch up higher in coming months pushing inflation upwards at a higher rate. This poses crucial challenges for the Reserve Bank of India as economy is recovering from recent downturn and any interest rate moves this time should be in careful consideration of both inflation and recovery.
Share Market
Equities started September month on a bearish note but soon recovered and rose for most part of the month. Sensex closed the month at 17126 highest since June’08. Rise was 9.3% from August’09.
Government Securities
For Benchmark 6.90% 2019 bond, the month started with high yields of 7.44% but during the month buying in the G-Sec pushed yields to a low of 6.95%. Yields stood at 7.19% on the last day. Volumes also increased considerably during the month.
Gold Prices
Gold prices rose substantially during first half of the month to reach a monthly high of $1,024/Oz. Thereafter prices corrected a bit to close at $ 1, 008/Oz.
Crude Oil Prices
Crude oil remained quite volatile during the month. From last month’s close of $69.96/brl, prices rose to a monthly high of $72.47/brl and thereafter fell to $66.02/brl. Month end price was $70.61/brl
Exchange Rate – Dollar – Rupee ($-INR)
Rupee weakened on the 1st day of month to 49.13 that was the highest point for the month. Thereafter rupee strengthened continuously to close the month at 47.70, 2.1% lower than last month.
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Author: Praveen Bajaj, B.Com(H), MBA (SCMHRD)
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