Rupee falls 30 paise to 77.55 against US dollar in early trade

The Indian rupee opened lower at 77.52 against the US dollar on May 12. It had closed at 77.24 against the US dollar on Wednesday.

The rupee slumped 30 paise to 77.55 against the US dollar in opening trade on Thursday as a lacklustre trend in the domestic equity markets and a firm American urrency weighed on investor sentiment

Besides, persistent foreign fund outflows and elevated crude oil prices impacted the domestic unit, forex traders said.

At the interbank foreign exchange, the rupee opened sharply lower at 77.52 against the American dollar, then lost further ground to quote 77.55, registering a fall of 30 paise from the last close. In initial deals, the domestic currency was moving in a range of 77.50 and 77.57.

In the previous session, the rupee had settled at 77.25 against the American currency.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.10 percent higher at 103.95.

On Tuesday, the rupee had settled at 77.34 against the American currency.

Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd, said, “USDINR spot touched a fresh all time high of 77.62, after higher than expected inflation print in US pushed US Dollar Index to a fresh 20 year high. Weakness in equities was an add on force for the US Dollar. We suspect RBI may have sold $ to stem the decline in the Indian Rupee. Overall view is of a range, between 77.20 and 78.20 on spot.

What does it mean for Indian investors investing abroad

Viram Shah, Co-founder & CEO, Vested Finance said, “Your investments in the Indian stock market are in rupees. However, when your invest overseas (in the US stock markets) it is in dollars. You first convert your money into USD to invest in the US stock markets and then back to INR when you redeem it. When the rupee depreciates against the dollar, it effectively means an additional return on your US investments. With the rupee hitting a record low against the USD, Indian investors in US markers will stand to benefit. So far in the current calendar year, the rupee has depreciated by almost 4 percent against the dollar.

"The rupee has depreciated by approximately 50 percent compared to the US dollar in the past 10 years. So, 10 years ago, if you had invested Rs. 5,000 in Nifty 500 (Indian stock market), your investment would have grown to approximately Rs 15,000 in 2022. But, if you had invested the same 100 dollars in the S&P500 (US stock market), your investment would have grown to approximately $320 in 2022. That is nearly Rs 24,000.”

Stock market indices plunge

On the domestic equity market front, the 30-share Sensex was trading 822.94 points or 1.52 percent lower at 53,265.45, while the broader NSE Nifty declined 239.30 points or 1.48 per cent to 15,927.80.

Crude declines

Global oil benchmark Brent crude futures declined 1.11 per cent to USD 106.32 per barrel.

RBI to raise repo rates

The Reserve Bank is likely to raise inflation projections in the Monetary Policy Committee (MPC) meeting next month and would also consider a rate hike to tame inflation which is above its comfort level, according to sources.

The MPC, headed by the RBI Governor, is scheduled to meet between June 6 and June 8. It has been mandated to keep retail inflation in the range of 2-6 per cent.

Morgan Stanley cuts India GDP estimates

American brokerage Morgan Stanley on Wednesday cut its India growth estimate by 30 basis points for 2022-23 and 2023-24 on global headwinds, and warned that macro stability indicators like inflation are set to ''worsen'' going ahead.

According to sources, tightening of policy rates by major central banks, including the RBI, would adversely impact demand in the next 6-8 months and slow down the recovery process.

Besides the Reserve Bank of India (RBI), several central banks including the US Federal Reserve and Bank of England have hiked their benchmark lending rates to rein in inflation, which has been exacerbated by the Russia-Ukraine conflict.

FIIs remain net sellers

Foreign institutional investors remained net sellers in the capital market on Wednesday as they offloaded shares worth Rs 3,609.35 crore, as per stock exchange data.

Published on: Thursday, May 12, 2022, 09:29 AM IST