RBI’s stance of keeping all key rates unchanged spelled doom for both rupee and stock markets on Tuesday as rupee crashed by a whopping 106 paise to three-week low of 60.47 wiping out all the gains notched up on central bank’s recent liquidity tightening steps, while Sensex fell 245 points to its three week low of 19,348.34 making investors poorer by Rs 1 lakh crore.
Experts believe the biggest cause for the fall was the sudden weakness in currency which depreciated to an all time low of 60.55 per dollar and eventually closed weak at 60.48 per dollar. Rupee fell nearly 1.8 per cent in Tuesday’s session, the biggest daily percentage fall since June 26. The sudden fall in the rupee was a result of rise in dollar demand from OMCs.
Nifty fell over 76 points and finally closed at 5,755.05 levels. Apart from the weakness in rupee, few experts pointed out a buzz which was floating the markets. The buzz is that since the elections are around the corner, parties will be needing funds and global players are predicting going forward currency might even slid down to 65 per dollar levels.
Speaking with The Pioneer, experts expressed concerns towards the ever weakening ruppe. Ravi Rastogi from Globe Capital said, “Rupee weakened due to the end of month demand from oil companies. RBI is focused on controlling the fall in currency but now government has to take steps to contain the current account deficit (CAD).” He also stressed that there was uncertainty among investors and which caused a heavy sell off in midcap shares. “It is imperative for the currency to stabilize because if it continues to weaken, country’s balance of payment will be affected,” he added. Escorts Security’s Ashok Agarwal feels that RBI’s policy announcements were as per expectations but rupee took the markets by surprise.