Heavy dollar demand from importers and renewed fear of the US Feds soon start tapering of its monthly bond buying program pushed rupee down by 58 paise. The domestic currency registered its biggest fall in a month as it depreciated to Rs61.83 per dollar levels. Equity markets also traded in pressure as investors and institutions continued their booking profit. The benchmark Sensex retreated for the third day in a row from an all-time high, dropping 246 points to close below the 20,925.61.
Talking about rupee depreciation, Abhishek Goenka, CEO of India Forex Advisors said, “It has been a weak session for the rupee amid negative stock markets and fresh demand for dollars from oil companies.” The rupee closed after falling by 58 paise, the most since November 11, when it tumbled by 77 paise. While rupee was traded in pressure, the dollar index was up by 0.10 per cent against a basket of six major global currencies ahead of next week’s US Fed meet.
The Index of Industrial Production contracted 1.8 per cent in October, compared with an 8.4 per cent expansion a year earlier, the government said. Retail inflation in November was 11.24 per cent against a revised 10.17 per cent in October.
Just like rupee, stock markets came under heavy selling pressure as institutions booked profits from the recent rally to record highs. Sensex breached the psychological level of 21,000 and ended after losing 245.80 points at 20,925.61 while the broader index Nifty fell by 70.85 points to 6,237.05. It was the biggest drop in three weeks for the index. It was the biggest drop since November 21. The index has lost 400 points in three sessions. As per provisional data provided by the stock exchanges, foreign institutional investors invested a net of Rs 187.81 crore in equity markets.
Apart from profit booking, analysts said that investors were taking a cautious stand ahead of the Reserve Bank of India’s monetary policy on December 18. The RBI yesterday said it will focus on controlling inflation and improving liquidity. Sentiment was also weighed down by weak global trends on increasing expectations the US Federal Reserve would soon start tapering its monetary stimulus program.