Rise in global oil prices and contagion risks from emerging markets pushed the rupee to a fresh all time low that ended 71.21 against the dollar, as compared to the previous close of 70.00 on Friday. The currency depreciated 21 paise or 30% on Monday as compared to it’s previous close. The yield on 10-year benchmark bond also closed above 8%, for the first time in almost four years.
"The fall in rupee is manly to the global factors like higher oil prices and also there was large scale outflow from the equity and bond market,” said Anindya Banerjee, currency strategist, Kotak Securities. Brent crude oil moved up by 0.57 per cent 78.08 a barrel.
He said speculators in the off-shore market are also active which is also adding pressure.
“Weakening of some other currencies like lira also added to the pressure. Now that every week the rupee is hitting all time low, so speculators are quite emboldened which are mainly happening in the off shore market, which the RBI can do nothing about,” Mr Banerjee said.
The rupee has depreciated close to 11% this year which is the worst performer in Asia. The central bank is not seen intervening aggressively to curb the fall. The country’s foreign exchange reserves fell about $ 26 billion since it’s the high of April.
“It may head to the levels of 72 in a couple of weeks, unless we see a dramatic turnaround in the emerging market currencies, which is unlikely," Mr Banerjee said.
Sell off int he last hour of trade erased all gains for the equity indices with the BSE Sensex fell over 332.55 points or 0.86% to end at 38,312.52 and the NSE Nifty dipped below the 11,600-level by losing 98.15 points to close at 11,582.35.
FMCG stocks were the biggest laggards on Monday with banks, energy, IT, infrastructure also impacted the fall. Midcap stocks were also under pressure which shed around 0.4%.
On a net basis, foreign portfolio investors (FPIs) sold shares worth Rs 212.81 crore Friday, as per provisional data.