The rupee takes a tumble, even with the RBI's intervention

The rupee has been on a sharp downward slide against the dollar, now at a nine month low of 68.5. The fall has been propelled by money rapidly exiting Indian stocks and bonds - over $2.7 billion has already moved out of the stock markets. The US markets have become for now, where all the action is happening: the upcoming Fed interest rate hike as well as the new Trump government's big spending promises, is driving investors back to the dollar. 

It is rumored that the 'Big Daddy' - what traders call the RBI - is intervening in Indian markets to stem the rupee's decline, selling millions of dollars to offset rupee sales by traders. The RBI now has enough cash to do this: Indian banks have received more than Rs 5 lakh crore in deposits as people queued up to deposit and exchange old notes, giving the RBI liquidity to stem the rupee fall. Still, some grey market currency dealers have been selling dollars for anywhere between Rs 85 and Rs 115. 

"Presents for Everyone!"

US markets in the meantime, are up, up, up. The US Dow has hit above 19,000 on expectations that Trump will cut regulations in the financial sector, introduce tax cuts and boost government spending. Bank stocks in the US have gained over 13% since Trump's election win. Investors don't seem perturbed that Trump has yet to explain how he will be funding these measures - the US President Elect has taken a "presents for everyone!" approach, promising both big government spending and steep tax cuts for everybody. 

Indian companies on wait and watch mode

Markets are still waiting as demonetization works its way through the markets. Farmer struggles around crop planting after demonetization is threatening farm output months down the line, which would then impact food prices and consumer spending. The success of the government's steps to provide loans to farmers remains to be seen, with bank infrastructure aready burdened with long queues and notes exchanges. 

Demonetization hit Indian companies just as many firms were beginning to see the earnings recover with bumper sales and Diwali spending, as well as better industry production and agri numbers. Now however, growth has hit a fence, with many expecting that the slowdown will continue for at least a couple of quarters.

One furniture and customer retail company's marketing head estimated that sales had fallen across outlets "at least by 50%. We used to see plenty of big-ticket purchases that were made all in cash," he said, 'Now that has almost disappeared." SME offices say that their business has fallen anywhere between 20-50%. 'The first week after demonetization was the worst," one SME businessman says, "Now we are still trying to recover, and had to delay salary payments."

Photo: Trump with his VP Mike Pence (Hilary Swift/NYT)