What will be the effect of foreign investments in india on exchange rate? explain?
Answers
Answered by
0
What can be the effect of increase in flow of Foreign Investment to India?
Still have a question? Ask your own!
What is your question?
5 ANSWERS

Navin Hemani, Finance Dabbler.
Answered May 26 2014 · Author has 54 answers and 185.5k answer views
Increased foreign Investment in India is going to have a lot of positive effects:
1) Rupee will become stronger compared to what it was earlier: The only reason why the good old Rupee has been declining in value compared to the USD was the unprecedented withdrawal of USD from India owing to the fact of negative perception about the stability of Indian Economy due to unstable government among global investors. Due to the tremendous withdrawal of USD from India, the supply of money became less and hence the value of USD shooted up (Fundamental Economics principle of Supply and demand).
As Modi is Business friendly and in addition the general perception that BJP will have a stable government, Global investors will pour in money in India (as the returns on investment in developing countries is far better than the already saturated developed economies). More the USD supply, lesser its value compared to INR and hence, INR will become strong.
2) The stock market is going to reach record levels: As a significant amount of foreign investment comes in the form of FII investment in to the Indian Equity market, demand for shares will shoot up and hence prices will reach record levels, NIFTY alone is projected to cross 10,000 mark by the year end.
Still have a question? Ask your own!
What is your question?
5 ANSWERS

Navin Hemani, Finance Dabbler.
Answered May 26 2014 · Author has 54 answers and 185.5k answer views
Increased foreign Investment in India is going to have a lot of positive effects:
1) Rupee will become stronger compared to what it was earlier: The only reason why the good old Rupee has been declining in value compared to the USD was the unprecedented withdrawal of USD from India owing to the fact of negative perception about the stability of Indian Economy due to unstable government among global investors. Due to the tremendous withdrawal of USD from India, the supply of money became less and hence the value of USD shooted up (Fundamental Economics principle of Supply and demand).
As Modi is Business friendly and in addition the general perception that BJP will have a stable government, Global investors will pour in money in India (as the returns on investment in developing countries is far better than the already saturated developed economies). More the USD supply, lesser its value compared to INR and hence, INR will become strong.
2) The stock market is going to reach record levels: As a significant amount of foreign investment comes in the form of FII investment in to the Indian Equity market, demand for shares will shoot up and hence prices will reach record levels, NIFTY alone is projected to cross 10,000 mark by the year end.
Similar questions