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Rupee Most Undervalued Currency in the world: Big Mac Index

Why are Indian exports surging (up 46% during Apr-Jun 2011) when the rupee is at a 3-year high against the US dollar? It's because the most quoted exchange rate of the rupee ( versus $) is also the most misleading right now. In real terms, the rupee is actually one of the most undervalued currency in the world.'s .

The July 2011 index, published this weekend, included India for the first time since it was invented in 1986. It shows that India has the most undervalued currency among 37 major currencies — 53% lower than the U.S. dollar.

The index also shows the purchasing parity exchange rate between the Indian rupee and the U.S. dollar to be just 20.7. In other words, $1 can buy goods worth nearly 21 rupees in India. The actual exchange rate is 44.25 rupees for 1 U.S. dollar.

India, which makes a debut in the index this week, has one of the most undervalued currencies vis-a-vis the dollar—even more than the Chinese yuan. As The Economist says, it's fast food for thought.

The famous Big Mac index proves this conclusively. Developed by The Economist 25 years ago, the Big Mac index uses the price of McDonald's burger in different countries to construct an informal (but surprisingly accurate) indicator of real exchange rate.

It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of a basket of goods and services around the world. At market exchange rates, a burger is 44% cheaper in China than in America. In other words, the raw Big Mac index suggests that the yuan is 44% undervalued against the dollar. But we have long warned that cheap burgers in China do not prove that the yuan is massively undervalued. Average prices should be lower in poor countries than in rich ones because labour costs are lower. The chart above shows a strong positive relationship between the dollar price of a Big Mac and GDP per person.

This is a simplistic way to demonstrate purchasing power parity, a theory that says that the exchange rate between two countries should move toward “correct” value, which would make the price of a basket of products the same in both countries. But despite being a crude measure, many economists and market pundits pay attention to the Big Mac index — including the Reserve Bank of India.

In a paper published in April, authors from the Indian central banks’ department of Economic and Policy Research, cited the 2010 Big Mac index when discussing how undervalued the Chinese yuan was.

Even by the standards of the recent financial crisis, Thursday’s selloff in stock markets was sizeable.

The growing nervousness over the debt crisis in Europe, the risk of a “double-dip” recession in America and a view among investors that policy makers, including the Japanese government and European Central Bank, had failed to shore up confidence accelerated this week’s selloff.

The worst hit stocks were those of the world’s big natural resources groups, including miners, oil companies and traders. Despite the prices of many commodities remaining near recent highs, their shares prices tumbled, sending valuations to the lowest levels of the year.

The divergence between resources stocks and the prices of actual raw materials evokes memories of mid-2008, when equity investors were quicker in anticipating the global financial crisis.

Are equity investors right again? If so, a sharp economic slowdown, or worse, could be at hand. Other sectors, such as financial services, suffered steep falls too on concern over their exposure to the sovereign debt crisis in Europe and the risk of more bad loans.

The list of tumbling resources stocks on Thursday included Xstrata, the London-listed miner, which fell 8.5 per cent, Royal Dutch Shell, Europe’s largest oil group, which fell 5.2 per cent, and Vale of Brazil, the largest iron ore producer, which dropped 6.3 per cent.

Freeport-McMoRan, a top copper miner, fell 5.9 per cent and Archer Daniels Midland, one of the largest food commodities traders, was 4.5 per cent lower.

After two weeks of heavy losses, the FTSE All World Mining and the FTSE all World Oil and Gas indices are up just 7.6 and 14.6 per cent, respectively, over the past year.

In the same period, the benchmark Reuters-Jefferies CRB index, a basket of commodities including oil, copper and wheat, is up 22.1 per cent.

Glencore, the world’s largest commodities trader, which came to the market in a $60-billion (U.S.) flotation in May, is among those hardest hit. The company has lost 17.9 per cent so far this week. On Thursday, it closed at 391p, more than 26 per cent below its flotation price and 8 per cent down on the day.

Once prices break out of the triangle they usually have explosive moves. Right now the Sensex is stuck in the triangle as shown in the graph. If the index closes outside the triangle on the downside, prices will head lower. On the other hand a close above the triangle's borders will take prices higher. Long term traders tend to avoid asset classes moving inside a symmetrical triangle. They take positions only after prices close outside the triangle.

Yes!!!!!!!!!!!

Commodities Trading Almost All Time High!!!!

But Commodity Stock Down to Earth!!!

Reason We Dont Now!!!!!!

The investment ideas of Warren Buffett is most basic and simple to implement. The beauty of his investment ideas is that they are so easy and logical that at timespeople overlook the same ideas even though it must have crossed their mind. These investment ideas of Warren Buffett has not only help the maestro to make billions but also stands as a guiding principles for every other investor of this world.

Warren Buffett’s investment ideas asks us to buy stocks of only those companies whose “fundamentals” are very strong and its stock is available at “undervalued price”. When we say strong fundamentals we mean a healthy financial report, unique product line which is run by exceptional managers.

Think Big TO EARN BIGGG

1.RBI meets to take stock, ensure order

Yes!!!!

The Reserve Bank of India (RBI) brass met today to take stock of the global financial situation in the wake of the US credit rating downgrade and the possible implications for India.

According to sources, the RBI will closely monitor global developments, and try to maintain orderly conditions in domestic financial markets. The central bank is expected to issue a statement before the markets open on Monday to ensure the participants avoid a knee-jerk reaction. It will also ensure that liquidity does not become a problem for Indian banks.

Among the factors to be closely monitored were crude oil and commodity prices, economists said. A fall in these prices, which economists regard as highly probable, is likely to decide the central bank’s policy stance. It has already raised the policy rate 11 times in 16 months.

Be Alert!!!!!!!!!!!!!!

Something not going good in market!!!!

Stay Cautious in Near Term!!!!!

Yes!!!!!!!

You All Know What Happened in Market!!!!!

Always..............track me Brings.......Accurate Idea of market Trends

When Street Talker Barking......

Street Talker Barking.....Nifty Can go 4800...4500...4200 Due to High Crude Price..........

Ongoing Scams Budget Worries

When.....................

1.Some Big Opertor Saying Sensex Heading to 16000-14000

According to a recent report by Morgan Stanley Research on emerging markets , the first half of the year will continue to be difficult in terms of returns but the performance is likely to improve in the second half of the year!!!

The report highlights three possible scenarios for the MSCI Emerging Market Index-a bull case, a bear case and a base case. It assigns different weightages to each (see graphic).

Accordingly, the report says, earnings are likely to see a deceleration in EPS growth, from around 40% YoY in 2010 to 13% YoY in the base case and 4% in the bear case!!!

FII Figure!!!!!!

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What To Do Today........

Nifty....Today Face Resistence at....5215...5293....5330

Nifty.....Today Support at .....5055...5002...4925

Nifty Range...4800--------6600

TRACK ME RESEARCH......

NEXT TGT FOR

WE SHORT NIFTY @6100 TGT 5350 / 4800

OUR 1 TGT HIT NIFTY 5350OUR 2 TGT ALSO DONE 4850

Scammmmmmmmm Rumors Every where So Stay Away...

Our Opininon for Today's Market.......

1.Stock Specific Movement Expected Today ......

2.Midcaps Looks Good........

INTRADAY HOT STOCKS: 09/08/2011

BUY IRB AB 166 TGT 170/174 SL 164 SELL BELOW 162 OPEJ

SELL INFOSYS @ 2450 TGT 2400//2350 SL 2490 TGT HIT

BUY CIPLA AB 309 TGT 312/315 SL 307 SELL BELOW 302 TGT HIT

BUY TECH MAH @710 TGT 720/730 SL 703 SELL BELOW 700 TGT HIT

PAID CALL
BUY NIFTY @ 5000 TGT 5050/5100 TGT HIT
BUY BK NIFTY @ 10060 TGT 10150/10250 TGT HIT
BUY RIL@ 760 TGT 780 TGT HIT
SELL GOLD BEES@ 2525 TGT 2500/2475 TGT HIT
BUY LIC@ 201 TGT 207 TGT HIT
BUY BPCL@ 700 TGT 710 TGT HIT
COMMDITIES
SELL GOLD@ 26000 TGT 25800/25400 TGT HIT
SELL SLIVER@ 58300 TGT 57500 TGT HIT
BUY COPPER@ 395 TGT 400 TGT HIT
BUY NIKEL @ 980 TGT 990 TGT HIT
BUY CRUDE@ 3550 TGT 3600/3650 TGT HIT
CURRENCY
SELL USD@ 45.40 TGT 45.30 TGT HIT