O Ashuji...
May 31 (Reuters) - Brazil's benchmark Bovespa stock index
fell by more than 2 percent on Friday, led lower by construction companies in
the first day of trading since Wednesday's larger-than-expected interest rate
hike by the central bank. (May 31, 2013)
(Reuters) - India's boldest attempt yet to prevent a rout in
the rupee delivered only a modest lift in the currency but shares slumped and
bond yields jumped as investors worried that policymakers might overplay their
hand and damage economic growth. (July 16, 2013)
Both Moves were intended to curb "excessive" volatility/fall in their currencies. Both India and Brazil like many other emerging markets are facing problem of stagflation (High inflation coupled with low growth rates). Brazil continued its rate hike cycle, followed by one more rate hike in July. Bovespa fell 10% within 10 trading days post surprise hike on 29th May 2013 and 16% till date post surprise hike. Though Brazil was down 8% YTD till 29th May 2013, fall accelerated post larger than expected hike.
Indian market was taken by surprise with tightening measures undertaken by RBI on 15th July 2013 (post market). Most commentators are of hope that such measures are temporary, while experience in other emerging markets like Brazil, Indonesia (soon Turkey) indicates tightening cycle may have further to go. This indicates Indian markets may have more downside than most expect.
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