After plunging to a record intra-day low of 61.80,the rupee rebounded sharply to close 11 paise higher with the Reserve Bank of India selling dollars to stem the currencys slide. The appointment of Raghuram Rajan as the new RBI Governor also raised market hopes of a new approach to currency and inflation management.
The rupee closed at 60.77 per dollar an intra-day recovery of one rupee. When the currency plunged as much as 1.5 per cent to an unprecedented low of 61.80 and the Sensex fell by 450 points,the RBI intervened,said a dealer.
The rupee hit a fresh low as the dollar strengthened and demand of the US currency from importers increased. The sharp rupee fall in the offshore market accentuated the decline,forcing the RBI to intervene.
The rupee recovered drastically after making a new record low of 61.80 levels on account of the RBI intervention. The free fall was seen after rupee touched 66 plus levels in offshore market,making the speculators active to buy heavily in the spot market. The recovery in todays session has to be retained by some concrete reform or policy announcement. Otherwise the RBI will keep on reducing its limited forex reserves, said Abhishek Goenka,founder & CEO,India Forex Advisors.
Varun Goel,Head PMS,Karvy,said,We expect pressure to continue on the rupee in the short term. While CAD has remained high,the weakening fiscal situation also revives the threat of a sovereign downgrade.
The rupee has depreciated 9.89 per cent against the dollar in the last three months. It has become the worst performer among major Asian currencies losing 13.83 per cent of its value after it touched the low of 61.21 against the dollar on July 8.
Sensex tanks 449 points; valuation of listed companies drops below $1 tn
Stock markets on Tuesday cracked under pressure of a sharp decline in rupee which hit a new low of Rs 61.80 against the dollar on Tuesday before recovering to close at Rs 60.77. The benchmark Sensex at the Bombay Stock Exchange (BSE) fell by 449 points or 2.3 per cent to close at a six-month low of 18,733.04.
With the fall on Tuesday and the decline in rupee against the dollar over the last few months,the total market capitalisation of Indian markets fell below the $1-trillion mark for the first time in 15 months as it stood,as per rough calculations,at around $991 billion as against a market cap of $1.011 trillion on Monday.
The last time it was below the $1-trillion mark was on May 3,2012 when the market cap stood at $931.1 billion
The broader Nifty at the NSE fell by 2.5 per cent or 143 points to close at 5,542 on Tuesday even as major global markets did not see any such trend. In India,the volatility,too,has risen and the India VIX the volatility index at the NSE closed at 14-month high of 22.73 which is highest value since June 15,2012 when it closed at 25.54.