Inside Story of Dollar Appreciation and BSE Sensex
November 23, 2011
Inside Story of Dollar Appreciation and BSE Sensex
Greetings from Hitesh! Thank you for your responses to my last 2 emails… Do You Invest In Shares The Way You Buy A Car? And 21 Trading Rules To Make Money In Share Market. Many of you have requested to write about sudden US Dollar appreciation against rupee. I have done my research and below given is Inside Story of Dollar Appreciation and BSE Sensex.
For the beginners, let us see what happens when exchange rates changes……
Eg. Is 1 US Dollar is exchanged at Rs.46 then you get Rs.46. Now it is exchanged at Rs.53…..It means you are getting Rs.7 per dollar extra without doing anything. In other words, those who have dollar and want to covert into Indian Rupee…they get 15% extra purchasing power (7/46*100). They can buy more in
Who Have USD?
NRIs / Exporters / FIIs / Corporate Investors and those who had converted rupee into USD illegally in the past and now they have USD and they want to convert into rupee again.
Is it a coincidence in last 12 years?
Just read all the periods……
Year 2000 to Year 2003:-
When Sensex made a top of 6170 something first time in February 2000, the USD rate was Rs.43.63. The same went to Rs.47 by Nov.,2000 and remained at an average of Rs.48 in 2001, Rs.49 in 2002.By the time of December 2003 it came down to 45 again !!
What happened to Indian Market during this time?
BSE sensex went from 6170 to 2400 in a span of 18 months. In other words…..the situations were most favorable for those who were converting USD to Rupee…they were getting Rs.6 extra (Rs.49 instead of Rs.43) and they can buy Indian shares at 60% discount as Index was down from 6100 to 2400 !!
Conclusion:-“Somebody was buying when everybody was selling during this period.”
Year 2004 to Year 2007:-
During 2004 USD remained steady around Rs.45.25. During 2005 USD remained steady around Rs.44. During 2006 USD remained steady around Rs.45. During 2007 USD dropped from Rs.44 in Jan 2007 to 39 by December 2007.
What Happened to Indian Market During This Time?
We saw Sensex going up from 4000 in 2004 to 20000 by Dec.,2007. Somebody who bought more during 2004-2006, sold heavily from March 2007 to Dec.,2007 and converted their rupee into USD.
How much they made?
(We have assumed they have bought Sensex for the simplicity of the calculations)
Assuming they had USD 100 and they converted during 2001 to 2003 at an average of Rs.47…they would have got Rs.4700 and they would have bought 2 units of Sensex which was at BSE Sensex 2400.
Same Sensex would have been sold during 2007 at an average of Rs.17000 and they would have got Rs.34000 for their investment of Rs.4700.
If they had converted Rs.34000 at conversion rate of 2003, which was Rs.47, they would have got approx USD 725. But since the exchange rate was Rs.40 in 2007 they got USD 850.
Conclusion:- They sold while others were busy buying shares and made money in shares market and also in exchange rates.
Year 2008 to 2009:-
Surprisingly, USD rate moved from Rs.40 in January 2008 to Rs.50 in March 2009. In other words while market was going down…….those who sold in 2007, were investing in 2008 and 2009.
They got Sensex sold at an average of Rs.17000 in 2007 and bought back around Rs.9000 in 2008 itself and also they got 25% higher Indian rupee against their USD.(USD moved from Rs.40 To Rs.50 as mentioned above).
Conclusion:- “Somebody was buying when everybody was selling during this period.”
Year 2010 to August 2011:-
USD remained steady at around 45 and so our market also…..not much investments and not much selling.
August 2011 to 22nd Nov.,2011.
From Rs.45 in August 2011, USD touched Rs.52.90 on 22nd Nov.,2011. During this time market came down from 17900 to 15800 today (23rd Nov.,2011).
Conclusion:- Panic will be created so that normal investors loses his last shirt and some body will start buying your shares.
What is our call on market?
USD and Rupee movement along with the Sensex can be a coincidence for once…..but not for last 12 years. Going forward market will see selling and USD touching Rs.55. In other words…….those who have USD will be getting shares worth of Rs.55 per USD at Index level of 13000 to 14000. Do you remember our third target for 2011 was 13000 !!
What is Our Advise?
Read the facts given above…..use your commonsense….if situations were so bad….who invested in 2001 to 2003, 2008 to 2009 and who is investing now?
We maintain our call for Sensex for 2011 and also for 2014. We have no doubt after reading above facts. Another factor in our favor this time is
Unique Approach of Destiny Management:-
Before we invest…….we always have the macro pictures, macro trends, macro facts, astrological inputs and micro level details with us. We understand one simple facts….The way you want to multiply your Rs.25 lakhs to Rs.50 lakhs to Rs.1 Cr.…..the guy with Rs.5000 Crs also wants Rs.10000 Crs to Rs.100000 Crs. Always remember this fact.
Personal Request:-
Do not get carried away by Media. Use your commonsense. Remember the basis law of investments…. “Buy when others are selling” and also remember, “there is not free lunch”.
Hope you enjoyed reading this email…This article is being sent as a part of investor educations initiatives taken by Destiny Management Services. We believe Education is the best place to invest. Do you agree?
Live With Passion…Invest With Passion.
Hitesh Parikh.
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