Home » Weekly Wrap Up » Market Buzz this week

Market Buzz this week

by Tavaga Invest

Will the Rupee Knight rise 🥷

RBI on Monday gave the green flag to the international trade settlement in Indian Currency. This bold move had analysts optimistic about the value of Indian currency in the foreign markets and the reduction of US Dollar dependency. But is it enough to reverse the slide? We don’t think so!

Why was the move necessary?

We break it down here.

RBI has been and still is very envious of US Dollars and their wide acceptability. So much so that now it’s playing mind games to make people ditch the dollar and accept Indian Rupee widely.

And the beginning is here. RBI has now allowed invoicing of international trade in rupees.

How will that help, you may ask? This will help a great way in smoothing export transactions with international traders. Let’s see how.

So first things first, two traders finalising a trade must convert their fiat current into US dollars to make the transaction happen. But why only dollars? The reason is that the US Dollar is the world’s reserve currency. Meaning, almost universally acceptable, easily convertible, and comparable. 

In such conversion, both the sending and receiving parties need to bear the foreign exchange fluctuations and hefty conversion rates for each transaction. 

But not anymore…This is where this new trade settlement rule peeks in. Now instead of converting the invoice amount into Dollars, one can simply transact in Indian Rupee if the counterparty has Rupee Vostro Account.

2 spots with one stone: firstly, it’ll ease the trade for Indian Exporters and secondly, Srilanka and Russia will benefit widely. As Srilanka is into the agony of low forex and Russia under west sanctions, it’ll pave the way for India’s healthy trade relations with both of them.

But RBI may still have to do what it is dreading the most – We applaud the move but it may not be enough to strengthen the rupee a lot. After all most of the countries including Russia would agree to this rupee trade from just about 5-7% of India’s total trade basket. RBI however would still have to dip into its forex reserves to apply any significant brakes to this rupee weakening. Mind ya, with US inflation still high, we may see more pain ahead!

Rupee be like: 

Indigo – Trouble on the ground 🤒

IndiGo Airlines have agitated its employees by blocking their several month’s remunerations. The employees decided to backlash against the Airline giant by mass sick leave which affected the operations adversely. 

What’s wrong with IndiGo?

The Airline is defending itself on the grounds that the Airline industry collectively faced a backlash due to covid in addition to high jet fuel prices and a weakening rupee against the dollar. It also made a statement that it’ll resolve all of the salary arrears once the business recovers.

IndiGo pays about INR 8,000 per month to a new technician and despite promises of revision, nothing had been done. Such ultra-low salaries aren’t justified by all means. 

Employees got no chill. The maintenance technicians got on mass leave against the protest of low salaries. It also reported an 8% increase in pilot salaries with overtime allowance. Tough times for IndiGo but it’s still expanding its flight destinations to cope with the competition. 

IndiGo to its Employees: 

Dollar Euro meet after decades 🤝

For the first time in two decades, Euro and Dollar meet. This means both of them are now trading at the same value as Euro fell down from costing $1.20 to $1 recently. Only two factors impacted and Euro started trembling. Here’s how.

What made Euro suffer?

  1. Soaring Inflation Rates: 

Euro Area (EA) is under the grip of 8.6% inflation this June and it seems to get worse. The Russia-Ukraine conflict is causing energy price spikes which are eventually affecting every domain but adversely. 

Also, the US had enough oil reserves and alternative energy resources which saved the Dollar from getting war-affected. Hence, the Dollar is protected as compared to Euro which works as an advantage. 

  1. Attractive US Investments: 

Another reason why the Dollar is outperforming is the soaring high US interest rates. This attracts investors to put in their money into US assets. Such attractive investments keep the Dollar thriving amidst inflationary fears in other countries.

Bottom Line: The Euro falling is very alarming for the EA economy and European Central Bank (ECB). With inflation soaring high on one hand and anaemic EA economic growth on other hand, ECB is in the condition each central bank fears from.

DMart churning money beating inflation 🥳

Retail chain mafia DMart got increased footfalls as students got back to school. Suffering for the last two years, this school reopening season brought back DMart its long-lost fortune. What a start to the year by hitting Rs. 10,038 crore revenue for the quarter ending June.

Damani anticipated a “one-disruption free quarter” and it’s right there at his feet. But is this here to stay?

Let’s uncover the Quarterly Marksheet

The online shopping fashion and less attraction towards FMCG essentials affected DMart more or less but the current numbers suggest a recovery. Is this the real picture?

Definitely not. 

The June quarter numbers are the result of the traditional summer holidays and school reopening season. It’s the seasonal success which definitely would not last till other quarters, warned the company. It’s only the upcoming quarters which will narrate the true story about the recovery. 

Bottom Line: After hitting the rock bottom in the last two years, DMart shows preservation by adding 110 modern stores around the nation expecting consumption growth. But the inflation seems to have restricted the common man’s pocket resulting in limited FMCG consumption. A saturation might be waiting for DMart if the inflation continued.

Airtel humming Gaana 🎵

India’s oldest music streaming platform is near to its acquisition by the telecom giant Airtel. 

Having been struggling with other music giants such as JioSaavan, Prime Music and Spotify, it’s been a long ride for Gaana despite being a first mover into the music streaming space.

The backstory.

Gaana is a more than a decade-old music streaming platform that’s backed by the Times Group, India’s leading media giant. It renders music in 21 languages with Tencent and Micromax holdings as its major holders. 

With the current pace of dealings, the CEO Gopal Vittal is himself participating in the negotiations with Time’s officials. 

Bottom line: But since Airtel already has its own music all Wynk, will this deal call for a collaboration like JioSaavan? Only times will tell.

What else made the news?

👎 Oppo got oppressed: Oppo India allegedly evaded customs duty worth Rs. 4389 crores.

⛓ King of good times behind bars: The infamous defrauder Vijay Mallya got arrested for 4-month imprisonment for not disclosing his assets after defrauding a loan.

Musk ditched Twitter: Twitter sued Elon musk after he backed off from buying Twitter for $44 billion as he promised in April.

😳 Time to come clear: Jyothi Mehta, widow of Harshad Mehta breaks silence on the actual facts of the case by launching a website harshadmehta.in

📱 Google into Airtel: Google acquired 7.11 crore shares of Bharti Airtel totalling $700 million.

What Tavaga Tribe has been up to this week?

Reading: The Alamank of Naval Ravikant by Eric Jorgenson – Building wealth but along with happiness and human satisfaction is what Naval focuses on in this book. An easy read that’ll definitely stay with you forever.

Listening: The Planet Money by NPR – An interesting and insightful podcast revolving around money, economy and finance. It’s like talking about money but friendly and undrstndable.

Meme of the week

Hoping against hope!

Key insights from our Research Team

Oil price debate: Spike or sink?

RBI vs. Rupee Battle – Giant Leap Missing

The Falling Value of Rupee: An Opportunity in Disguise?

Why is Financial Literacy Important?

Hope you have a safe and relaxed weekend!


Ruchi Mehta

Business Analyst

Follow Tavaga for more knowledgeable content and share it with your friends 🙂

Tavaga is the one-stop solution for all your financial worries – Book an appointment on Whatsapp

Related Posts

Leave a Comment