Our Bureau

Mumbai, July 21

CHINA'S move to revalue its currency yuan, much below the market expectation, will have a positive impact on the Indian equity market as it will bring in more funds from FIIs and put less pressure on rising interest rates, market experts said.

But several exporting sectors could be affected due to appreciation of rupee against US dollar after China's decision.

"Appreciation of yuan by 2.1 per cent is much below the expectation. But this will have a positive impact on Asian equities and commodities," said Mr Andrew Holland, Executive Vice-President, DSP Merrill Lynch.

Most of the experts said that this will increase India's competitiveness in export market against China, but its impact may not be much.

"Revaluation of yuan is minor thing, but this will have positive implication on the economy and this will directly impact the equity market," said Mr Bharat Shah, CEO and Managing Partner, ASK Raymond James Securities.

Some experts said appreciation of yuan will also lead to appreciation of Indian rupee and this could bring in additional inflows from FIIs.

"Rupee appreciation is better for FIIs," said Mr Naresh Kothari, Executive Vice-President, and Edelweiss Capital.

"There could be pressure on rupee to appreciate and this is negative for exports especially sectors like IT".

Mr Kothari said rupee appreciation would ease pressure on RBI from increasing interest rates.

However, Mr Nilesh Shah, President Kotak Mahindra Asset Management Company said there will not be any impact on equity market as the appreciation of yuan is small.

(This article was published in the Business Line print edition dated July 22, 2005)
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