Re plunges 55 paise on oil, trade deficit concerns

Re plunges 55 paise on oil, trade deficit concerns

Sensex sheds 72 points to end at 34,771.05, but IT stocks surge on widespread buying

BSE Sensex, Sensex, Rupee, US Dollar, Business News, Latest Business News, Indian Express, Indian Express News
Sensex sheds 72 points to end at 34,771.05, but IT stocks surge on widespread buying (File)

The rupee on Tuesday plunged by 55 paise to end at a fresh two-week low of 64.04 against the US dollar as the global crude prices soared to the $70-a-barrel level and India’s trade deficit expanded sharply for the month of December. Dealers said the forex market sentiment turned weak after the country’s trade deficit widened to a three-year high on rising oil and gold imports. India’s exports rose at a healthy pace in December by 12.36 per cent to $27.03 billion, but imports surged significantly to $41.91 billion, up 21.12 per cent, widening the trade deficit to $14.88 billion, up about 41 per cent year-on-year. The intense volatility pushed the rupee to hit a fresh low of 64.15 in intra-day levels during mid-afternoon after a sense of panic rippled through currency trading floors.

The rising inflation and speculation that the government may miss its deficit target after international crude oil prices hit $70 a barrel will give less space to the Reserve Bank of India to cut rates in the near term, adding to worries. The retail inflation accelerated to 5.2 per cent in December last year, though wholesale prices eased to 3.58 per cent in December 2017. Global crude prices consolidated recent gains at around $70-a-barrel on Tuesday, a level not seen since 2014. Brent crude futures were trading weak at $69.51 a barrel in early Asian trading.

“The rapid surge in global crude prices is a big reason for weakening of the rupee. The trade deficit has also expanded. It is likely to have a huge disruptive force and a continued source of volatility for rupee in 2018,” said a forex dealer. The dollar staged mild recovery from sharp losses posted against other major currencies abroad, but gains were expected to remain limited and the greenback was still trading within close distance of a three-year trough. Meanwhile, the Sensex shed 72 points to end at 34,771.05, while the broader Nifty finished at 10,700.45 points, down 41.10 points. However, IT stocks surged on widespread buying after a Morgan Stanley report said Indian IT services shares are set for a turnaround in 2018 as recovery in spending is “imminent”.

The BSE Sensex, after a higher start at 34,877.71, advanced to 34,936.03 in morning trade on continued buying by investors driven by encouraging quarterly earnings. However, across-the-board profit booking at record levels pulled it down to a low of 34,735.55. It finally settled 72.46 points, or 0.21 per cent lower at 34,771.05. The index had gained 410.44 points in the previous three sessions and closed at an all-time high of 34,843.51 on Monday.