Mumbai, Oct 9 (IANS) The continuous outflow of foreign funds from the country’s equity market segment along with persistently high crude oil prices plunged the Indian rupee to close at a new low of 74.39 to a US dollar on Tuesday.
In addition, fears over an expected hike in the US lending rates and fears over slippage in achieving the fiscal deficit target dented the Indian rupee’s prospects.
The Indian currency had opened the day’s trade at the Inter-Bank Foreign Exchange Market at 73.85 to a USD from its previous close of 74.07.
“The rupee remains under pressure due to sharp volatility in the domestic equities and rising crude oil prices,” Rushabh Maru, Research Analyst at Anand Rathi Shares and Stock Brokers said.
According to Edelweiss Securities Economist, FX and Rates Madhavi Arora: “Rupee has taken a beating as the central bank reiterated last week that inflation management remains its sole policy objective and policy action will not be premised on anchoring the currency.”
“Besides, with FPI now taking a sanguine view on India equities after having consistently exiting the debt segment since beginning of FY, further pressure is building on INR. Additionally, fears of fiscal slippage would further weigh on Indian asset classes.”
Besides, persistently high oil prices might not allow the rupee to make any substantial recovery. On Tuesday, Brent crude was priced over $84 per barrel.
Apart from global cues, any further outflow of foreign funds from the Indian equity and bond markets might have an adverse impact on the rupee.
In terms of investments, provisional data with the exchanges showed that foreign institutional investors sold stocks worth Rs 1,242.46 crore.
In the last six sessions beginning October 1, FIIs have sold shares worth about Rs 13,000 crore.