A wider trade deficit, along with outflow of foreign funds pulled the Indian rupee to a fresh record intra-day and closing low on Thursday.
The Indian rupee had plunged to an intra-day level of 70.39-40 – the lowest ever mark – against the greenback prompting automobile manufacturers and other import dependent sectors to raise prices.
It settled at a record closing low of 70.16 against the dollar, weakening by 26 paise from Tuesday’s close of 69.90 a US dollar.
“Dollar/Rupee closed above 70 levels on spot, a record low closing on a daily and weekly basis,” said Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities.
“Interestingly, today the rally in USD/INR occurred inspite of the recovery in Chinese Yuan and also Turkish Lira and also other EM (emerging markets) currencies. Rupee unable to take any positive cues from lower oil prices and even a rebound in the majors, Euro and GBP.”
Recent US sanctions and tariffs on Turkey had an impact on its and other emerging market currencies over fears of further global protectionist measures.
Further, data released by the Ministry of Commerce and Industry on Tuesday had shown that India’s merchandise trade deficit widened to $18.02 billion during last month as against $11.45 billion in the corresponding period the previous year.
“India’s trade deficit has widened sharply. This is a trigger for today’s fall in the rupee. Even though the Turkish Lira has recovered, the dollar index continues to move higher. Rupee is expected to remain under pressure in next few sessions,” Rushabh Maru, Research Analyst, Anand Rathi Shares and Stock Brokers, told IANS.
“Even if the rupee appreciates, the appreciation won’t sustain for long due to global uncertainty.”
Apart from global cues, outflow of foreign funds from the Indian equity and bond markets has had an adverse impact on the rupee.
Investment-wise, provisional data with exchanges showed that foreign institutional investors sold scrip worth Rs 825.08 crore, while the domestic institutional investors bought stocks worth Rs 133.78 crore.
Even the Indian equity market was subdued as the rupee plunged.
Index-wise, the wider Nifty50 of the National Stock Exchange (NSE) closed at 11,385.05 points, down 50.05 points or 0.44 per cent from its previous close of 11,435.10 points.
The barometer 30-scrip S&P BSE Sensex closed at 37,663.56 points, down 188.44 and 0.50 per cent from its previous close of 37,852 points on Tuesday.
“Markets corrected on Thursday as they failed to sustain at the highs of the day. Banks and metal stocks (due to falling commodity prices) led the fall,” Deepak Jasani, the Head of Retail Research at HDFC Securities, said.
“Indian rupee fell in the morning and again in the afternoon….”
Besides, the stock market, automobile majors such as Maruti Suzuki India and Mercedes-Benz India announced a price rise.
“Yo-yoing of the Indian rupee and volatility is further exacerbating uncertainty for the exporters, as any real impact on exports would get muted from several factors such as all-round depreciation of currencies of all the emerging markets, and increase in raw material costs for the exporting consignment,” Ravi Sehgal, Chairman of the Engineering Export Promotion Council (EEPC) India was quoted as saying in a statement.