Rupee resumes downward march, falls 25 paise to 45.88

The rupee opened at 45.65/66 per dollar and was quoted higher at 45.61/63 before starting the southward journey and breached the 45.80 level at around 1500 hrs and tumbled further to close at 45.87/88 per dollar, showing a net decline of 25 paise from the previous close of 45.60/61 per dollar.

According to forex dealers, the currency has so far lost more than 5 per cent during the current year since January. There was heavy all-round buying from both state run and foreign banks and the State Bank of India or RBI did not try to protect the rupee in any way and allowed it to go by its way, said the chief forex dealer at a leading private commercial bank.

The latest fall has come despite aggressive moves by the Reserve Bank of India (RBI) to drive up short-term interest rates and drain liquidity from the domestic money market, which it suspects of funding positions against the rupee.

The sucking out of liquidity in the last a few days followed a two-stage hike in banks’ cash reserve ratio to 8.5 per cent from 8.0, a cut in refinance limits and a hike in the benchmark bank rate to 8.0 per cent from 7.0, announced on July 21. The moves did little to prop up the rupee, quoted at 45.55/56 in afternoon trade. “If the rupee fall continues, the RBI might hike the bank rate and CRR again,” said a dealer.

But over the longer term the rupee, convertible only on the current account, could suffer from a slowdown in foreign capital inflows this year and a widening trade deficit, analysts said. And the trade deficit has widened around 26 per cent in the April-June quarter over year-ago levels. Moreover, commercial banks have started increasing prime lending rates.

Foreign exchange reserves have fallen more than $ 2.0 billion since April to hit $ 36.196 billion on July 28, partly reflecting the RBI efforts to improve dollar supplies to the local currency market. Traders said there was strong demand for dollars and that enquiries for September and October delivery-dollars reflected importers’ anxiety over the future.

Sensex dips by 64 pts, IT stocks down

MUMBAI:Indian stocks led by Infosys Technologies suffered a sharp setback pushing the benchmark Sensex down by about 64 points on the Bombay Stock Exchange (BSE) today in the wake of heavy bull liquidation and withdrawals by foreign funds.

Foreign institutional investors, who were net buyers to the tune of Rs 418 crore in the past four sessions from August 3 to 8, have suddenly withdrawn from the market with Morgan Stanley reportedly selling off heavily in software and media stocks in the light of fresh erosion in Indian rupee that hit a historic low of 45.87/88 to a dollar during trading.

A sharp fall in Infosys Technologies, the leading index heavyweight, affected the benchmark 30-share index which opened fractionally down at 4312.24 and later moved downwards to close at 4253.23 as against yesterday’s close of 4317.04, netting a fall of 63.81 points or 1.48 per cent. The BSE-100 index also dropped substantially by 40.21points to 2110.68 from previous close of 2150.89.

Attributing the negative turnaround to the unexpected setback to American Depository Receipt (ADR) of Infosys Tech last night, market sources said the sole adverse factor was the slowed down FII activity. They, however, said prices of select scrips like Himachal Futuristic and others were pulled up by operators at the concluding session of current settlement on the Calcutta Stock Exchange (CSE).