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Modi gains from rupee freefall

New Delhi, Aug 24 () : Modi’s chances of being the PM would get brighter, says CLSA the Asia-Pacific focused brokerage. It said that the economic crisis in stock markets could bring about an improvement in governance.

Christoper Wood column ‘greed and fear’ is widely read by economic analysts and the media. He felt that the more the economic crisis in India, the chances of Modi being PM gets better. He linked the volatile rupee to the political prospects of Narendra Modi to be named the BJP’s candidate for Prime Minister in May 2014 general elections. He says that the stock markets are pinning hopes on Modi to come as PM.

CLSA’s observation came in yesterday when the rupee recovered by 2%. From May onwards till now, the rupee lost 16%. On Thursday, the rupee breached the 65 mark and in the past one week the stock market has lost 1000 points.

The BJP has named Modi as the campaign committee head but has desisted from making the PM candidate. CLSA said that RBI moves on curbing liquidity misfired and sent the wrong signals since there was a communication problem. No firm steps have been taken to do away with pessimism.

Capital outflows curb is only a short-term measure. The present crisis is due to the wrong doing by not having an investment pattern. CLSA says that India among other Asian markets faces a sovereign debt situation. India is just one step from being rated junk. It is in the BBB rating, the lowest before junk. It said FIIs who have not sold their stocks of quality brands will now start doing so.

The panic situation has more or less gone as the CAD being contained with gold import under curbs, foreign exchange reserves  are increasing as exports are rising. FM’s assurance that it would not go in for capital controls and that RBI would roll back the recent measures saw rupee and stocks recover.