The wealth of billionaire Mukesh Ambani, the richest man in India dropped by $5.6 billion since May, or 24 percent to $17.5 billion, due to the depreciation of rupee to a record. Rupee, the Indian currency has had in the last month the worst development of major global currencies.
The currency is under pressure to sell assets in emerging markets by investors worried that the Federal Reserve could reduce the monthly bond purchasing program. Massive liquidity pumped into the financial system by the Fed supported equity markets on a global level and also assets in emerging markets, where higher returns on investments could be gained.
Mukesh Ambani, chairman of Reliance Industries Ltd has significant assets in India, including stakes in companies listed on the stock market. Reliance Industries Ltd. stock lost 15 percent since July 19.
“There is irrationality; the rupee is weak and will go down further. Foreign institutional investors are invested in the larger-cap companies and are pulling out money from India. That is putting a lot of pressure on those companies,” said Munesh Khanna, senior partner at Mumbai-based Grant Thornton LLP company.
Institutional investors sold shares of companies in India worth $3 billion as of June 3, according to the Securities and Exchange Board of India.
Wealth of Anil Ambani, Mukesh’s younger brother, declined by $1.7 billion since May, or 17 percent to $6.3 billion. Anil ranks eighth among the richest people in India. His wealth mainly comes from shares in publicly traded companies. His stock in Reliance Communications Ltd., one of the largest cell-phone companies in India also lost value after the company reported for the first financial quarter (ending June) a drop of 33 percent in net profit. This is actually the 15th drop in the last 16 quarters.
The rupee reached yesterday an all-time low of 64.55 per dollar. The S&P BSE Sensex index of the stock markets in India was down 1.9 percent yesterday to 17,906 after a four-day drop of 7.6 percent.
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