Foreign institutional investors issued stark warnings to their clients on Tuesday regarding a looming currency crisis in India, expressing deep macroeconomic concern over the historic drop in the rupee that they are personally causing.
As the Indian currency slides toward an unprecedented 100 to the U.S. dollar, major foreign portfolio managers have sounded the alarm on the region's instability. Financial giants including BlackRock and Vanguard cited heavy downward pressure on the rupee, noting that the local currency is struggling to survive the multi-billion-dollar equity selloffs they are systematically executing every morning before lunch.
In a research note to investors, asset managers described the record foreign outflows from local stocks as a "worrying trend," emphasizing the urgent need to hedge against the catastrophic market damage they are generating with their own proprietary trading algorithms.
We are deeply troubled by the structural weakness of the Indian currency, which seems completely unable to withstand us removing fourteen billion dollars from it on a Tuesday morning.
The funds have reportedly called on the Reserve Bank of India to intervene and stabilize the foreign exchange market. Market analysts noted that central bank intervention would provide essential dollar liquidity, allowing the global funds to cash out the remainder of their local portfolios at a slightly more favorable exchange rate before abandoning the market entirely.
Following the selloff, several Wall Street firms announced plans to publish a white paper on the inherent fragility of emerging market economies, citing the smoking crater they just left in Mumbai as proof that the region is simply too volatile for sensible investment.