Yet the analysis of fluctuations in Tehran Stock Exchange and Iran Fara Bourse over the past decade shows that markets respond positively to greenback's strengthening against the national currency, albeit with a certain lag.
TSE and IFB's aggregate market cap stood at 3.85 quadrillion rials in the first month of the fiscal 2017-18 (started March 21). Considering the open market USD/IRR rate of 3,749 at the time, the cap stood at $102.6 billion.
Fast forward to today and the total cap is about 4.33 quadrillion rials, bringing the figure in USD terms to $68.7 billion, according to Financial Tribune.
It must be noted that the 63,000-rial USD/IRR rate used to calculate the above figure is based on the average rate traded in the black market. The government officially pinned the rate at 42,000 rials as of April 9 in an attempt to put a stop to rial's rapid devaluation.
Despite the government's intervention, no trade takes place at that rate in the open market. The open market has, in fact, turned into the black market ever since the Central Bank of Iran delegated bureaux de change's responsibilities to banks and deemed anyone engaging in open USD trading as "smugglers."
Today's atmosphere is reminiscent of the events of the fiscal 2012-13 when the rial experienced the same devaluation trend against USD that it's going through today. Stocks took their time to respond to currency market developments, as their boom came in the next fiscal and brought both TEDPIX and IFX to new heights during the period.
What transpires is a kind of a market revaluation. Currency crises in Iran usually cause cash to move away from risky investment options such as stocks into safe havens and foreign currency itself to limit the devaluation of investors' capital. Stocks consequently drop in price while they retain their previous earnings, making them attractive options in the long run.
Now, whatever money comes into the market will eventually boost the shares back to their pre-crisis levels, bringing them on par with the new currency status quo.
And this is especially true for the market's export-oriented companies such as miners, steelmakers and petrochemical producers, which make up more than half of the market. Their costs are in rials, while they sell in USD.
Hence, the equity market now has an opportunity to grow by about 2.2 quadrillion rials or 33% more in the long run to reach its March 2017 market cap standing in USD terms, according to data by Gozareshebourse.ir.
In fact, the proposed figure could be even larger, considering that it was calculated using USD/IRR rate of 63,000 rials reached in early May, while the FX market is growing more bullish by the day as it faces mounting political risks.
And it's true, markets need stability in the end—a calm and sober environment in which to predict, analyze and invest. But stable and predictable days are a rare commodity in Iran's economy, and when a crisis presents an opportunity for profiting, why not cash in?