CURRENTACOUNT DEFICIT & INDIAN STOCK MARKET Last week the Reserve Bank of India (RBI) released quarterly BOP data which showed India’s current account deficit reached below a new high of 32 billion USD or 6.7 per cent of GDP in Q3 FY 2012. CAD, however is expected to narrow down as a result of slowing consumption, sluggish investment, fiscal consolidating, and moderating oil prices and gold imports, we project the full year figure will come in around 5 per cent—well above the RBI’s estimate of a sustainable level of about 2.5-3 per cent. The stockmarket will then see a new kind rejuvenation and traders in nifty might look forward to encash the profit. Given that it will likely remain around 4-5 per cent of GDP over the medium-term, the CAD will limit the RBI’s space for rate cuts, keep downward pressure on INR, and increase india’s reliance on potentially volatile portifolio flows. While a surge in capital inflows due to DM liquidity and government r
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