Rupee continued with its trend of making new record lows in consecutive trading sessions. On Tuesday, again rupee slid 1.6 per cent to a new all time low of Rs 64.13 per dollar because of continuous outflow from the markets. The currency had already weakened 2.3 per cent during Monday’s session.
But as the session progressed and Reserve Bank intervened, the currency recovered 88 paisa and closed at Rs 63.25 per dollar, 12 paisa week. Experts said that the biggest reason was the constant rise in bond yields, which touched a five year high. The benchmark 10-year yield was up 20 basis points at 9.43 percent. Also, British pound for the first time ever touched a new bottom of 100.52 against rupee but finally closed at 99.04, down 25 paise. Stock markets also followed suit with Sensex ending 61 points lower after losing over 330 points at one point. Nifty closed at 5,401.45, 0.25 per cent up after recovering by nearly 95 points. FIIs sold stocks worth Rs 1,424 crore from domestic stock markets, as per provisional data.
Experts said it was ironic to see RBI again resorting to dollar selling as all of the attempts taken by the Government and the central bank fell flat on ground to curb the continuous weakness in the currency. All the emerging market currencies have been under immense pressure on the fears of US Federal Reserves would soon start to wind down its money policy, possibly as early as next month. The one-month onshore forward rate for the rupee was at 64.47 per dollar while the offshore non-deliverable forward was at 64.71 per dollar. Experts feel that this large gap only points out that the bearish sentiment on the currency is going to continue further more.
Commenting on the currency weakness, Finance Minister said that the fall in value of rupee in the recent period was because of supply-demand imbalance in foreign exchange market on account of elevated levels of current account deficit (CAD) and volatility in capital flows, particularly FII inflows. As a blow to the Indian markets, international brokerage house JP Morgan downgraded Indian equities to neutral rating from overweight, while Citi lowered its Sensex target to 18,900 from 20,800. Recovery in stock markets was lead buy metal index which rose by 4.84 per cent, followed by real estate and banking indices which jumped by 2.49 per cent and 0.75 per cent. While consumer durable, automobiles and healthcare indices fell by 3.54 per cent, 2.26 per cent and 1.59 per cent respectively.