Rupee falls below 86 against dollar; Sensex tanks over 1,000 points

The BSE’s 30 Sensex tanked 1,048.9 points, or 1.36 per cent, to close at 76,330.01. The NSE’s Nifty tanked 345.55 points, or 1.47 per cent, to close at 23,085.95.

“Indian rupee breached the 86 mark for the first time in history on risk aversion in global markets and a strong US Dollar,” said Anuj Choudhary, Research Analyst, Mirae Asset Sharekhan.

The jobs report showed that the US added 256,000 jobs in December 2024 versus estimates of 164,000 jobs. Unemployment rate fell to 4.1 per cent in December versus a forecast of 4.2 per cent.

The robust economic data in the US has led to an expectation of fewer rate cuts by the Federal Reserve in this year, forex market analysts said.

“According to a University of Michigan survey, US consumers expect 1-year inflation to jump to 3.3 per cent in January 2025 vs 2.8 per cent in the previous month. This raised expectations that the US Federal Reserve may not hike interest rates in its FOMC (Federal Open Market Committee) meeting in January,” said Choudhary.

Markets also lowered 2025 rate cut expectations to just one rate cut this year, down from two rate cuts previously expected. The US Treasury yields jumped post the release of jobs report with the 10-year yields rising around 4.8 per cent.

“Compounding the rupee’s woes is the sharp rise in crude oil prices, which has placed further strain on India’s current account. As a net importer of oil, India faces heightened fiscal stress whenever crude prices surge, weakening the rupee’s resilience,” said Amit Pabari Managing Director CR Forex Advisors.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.29 per cent higher at 109.97. The 10-year US bond yields also rose to 4.8 per cent.

Brent crude, the global oil benchmark, surged to $80.64 per barrel in futures trade.

Analysts expect the rupee to remain weak in the near term amid rising geopolitical tensions after the US imposed sanctions on Russian oil.

“However, RBI will keep on intervening in the forex markets which could prevent the pace of depreciation in the rupee. In the near term, we expect the rupee to trade in the range of 85.80-87.20 in the near term,” said Choudhary.

Domestic stock market also witnessed heavy selling pressure on Monday.

“The global markets witnessed a significant sell-off, prompting a similar response in domestic markets due to strong US payroll data suggesting fewer rate cuts in 2025. This has strengthened the dollar, driven up bond yields, and made emerging markets less attractive,” Vinod Nair, Head of Research, Geojit Financial Services.

All major indices saw a sharp sell-off. The BSE Smallcap declined 4.14 per cent and BSE Midcap fell 4.17 per cent. Nifty Bank fell 1.42 per cent.

“Wide-spread selling across the sectors fuelled along with massive exits in mid and small-cap stocks further worsened the sentiment,” said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

Rising crude oil prices would raise concerns of a spike in domestic inflation, which could further delay any rate cut hopes from the RBI in the near to medium term, he said.

On Monday, foreign portfolio investors net sold Rs 4,892.84 crore of equities, while domestic institutional investors net purchased Rs 8,066.07 crore of shares, according to the BSE’s provisional data.

In this month (till January 13),overseas investors have pulled out Rs 23,615 crore from the domestic equity markets, the National Securities Depository Ltd (NSDL) data showed.