The rupee remained weak against the dollar on Thursday but closed stronger than Wednesday’s weakest levels on the back of a better current account deficit (CAD) announced by the government.
The rupee closed at 60.18/19 per dollar compared to Wednesday’s close of 60.71/72. It had slumped to a record low of 60.76 in the intra-day on Wednesday. “The pre-market announcement that CAD narrowed in the fourth quarter of March 2013 helped the rupee recover from its all-time low,” said Jayant Manglik, President - Retail Distribution, Religare Securities Limited.
India’s CAD deficit narrowed sharply to 3.6 per cent of GDP in the fourth quarter of 2012-13. “The good news ends here. At 4.8 per cent of GDP for FY13, the country’s foreign capital requirement to cover the CAD was alarmingly high at almost $90 billion. The dip in CAD in the last quarter of 2012-13, we believe, is temporary and CAD will rise to settle at 4.5 per cent of GDP for 2013-14. Further financing CAD is a bigger challenge this year,” said Crisil in a report on Thursday.
Remittances to India have seen a fair growth as the rupee started depreciating. Since May, the rupee has declined over eight percent in comparison to the dollar.
“This scenario is favourable for an average Indian expat employed overseas as the value of the remittances appreciates by 10 to 12 per cent. We estimate that the inflow of remittances to India will surge in the coming days and expats will cash-in on this opportunity,” said Sudhesh Giriyan, Vice President and Business Head, Xpress Money.
Equities rebound
Meanwhile stocks rebounded on bourses. The Bombay Stock Exchange (BSE) 30-share sensitive index (Sensex) gained 323.83 points to end at 18875.95. The rally was led by oil and gas stocks, which gained 3.22 per cent, followed by information technology at 3.15, technology by 2.70 per cent, healthcare by 2.49 per cent, realty by 1.80 per cent and banks by 1.50 per cent.
Except consumer durables, which lost 1.08 per cent, and capital goods, 0.4 per cent, all other sectoral indices gained on Thursday.
On the National Stock Exchange (NSE), a broader 50-Share Nifty gained 93.65 points to close at 5682.35.
“The gaining of rupee from an all-time low set a positive tone through the day for equity market. By the end of the session, Nifty gained more than one and half percent with positive market breadth. The expiry of June contracts, rollover and unwinding of positions kept traders on their toes,” said Mr. Manglik.
Considering Thursday’s market moves, he said that “we will see further recovery in near future but sustainability will remain a key concern on both domestic and global fronts due to prevailing negative bias.”