"Japanese" stocks in red

In today’s bloodbath on Dalal Street, stocks with the “Yen” or Japanese connection are hit hard. Apart from the fears of war in the Middle East and recessionary trends in USA,, the bigger factor in play is actually the appreciating Japanese Yen.

After the Yen fell to a 38-year low vis-à-vis the US dollar, like how the RBI would have, the same way, the Japanese Govt also intervened, and pumped in $36.8 billion Yen and the Bank of Japan raised benchmark interest rates to "around 0.25%" from the earlier range of 0% to 0.1%, marking the highest level since 2008.

These two measures led to unwinding of the carry trade – a strategy wherein the investor borrows from a low-interest country and weaker currency which was Japan and then reinvests that money into assets of other countries, getting higher returns. With the rising interest rate in Japan and the appreciating Yen, there is immense selling pressure, who are now in a rush to repay their Yen debt, leading to unwinding in the equity markets world over.

This has impacted listed Indian companies with Japanese stakes, like Maruti, Jtekt, Honda India Power, SML Isuzu, Lumax Inds, Motherson Sumi, Asahi Glass and Samwardhana Motherson to name a few. They all are deep in the red today.