The Sensex also plunged 295 points to 37,290.67 due to hectic selling in financial and auto stocks as the rupee woes hit the stock markets.
Since the beginning of the year, the Indian rupee "has lost about 11 per cent of its value in nominal terms vis a vis the US dollar", the International Monetary Fund (IMF) spokesperson, Gerry Rice said.
The 30-share BSE index gained 159.93 points, or 0.42 per cent in opening trade, but soon turned choppy falling 37.10 points, or 0.10 per cent, to 37,548.41.
The government Monday proposed amalgamation of three public sector banks — Bank of Baroda, Vijaya Bank and Dena Bank — to create what will be India’s third largest bank in terms of total business at Rs 14.82 lakh crore.
Besides, dollar-selling by exporters and banks, fall in crude prices in the global market and weakness in the dollar against some currencies overseas amid US-China trade conflict, helped the domestic currency rebound, forex dealers said.
IMF spokesperson Gerry Rice, however, said the currencies of many of India's trading partners, including those in the emerging markets, too have depreciated against the dollar.
Rupee benefitted from the massive US Dollar re-pricing in the aftermath of the weak US inflation report, discounting the chances of Fed hiking rates four times this year.
This is the second consecutive week of major fall in the reserves which indicates that the central bank has been selling the greenback to fight the fall in rupee.
The rupee also bounced back against the British Pound to close at 93.76 per pound from 94.63. It recovered against Japanese yen to finish at 64.74 per 100 yens from 65.29 earlier. The rupee also recouped against the euro to end at 83.58 from 84.20.
The rupee touched a new lifetime low of 72.91 to the dollar in the opening trade on Wednesday but recovered 69 paise by the afternoon on suspected intervention by the RBI.
Escalating trade war concerns, consistent dollar demand from banks and importers, mainly oil refiners, following higher crude oil prices, kept the rupee under pressure, dealers said
The regulator will soon take a call on the recommendations by the fair market conduct committee to further strengthen the rules to deter financial crimes like frauds, market manipulations and insider trading.
Elimination of risks associated with physical certificates will be a key benefit from the decision, said the Ministry of Corporate Affairs.
The renewed concerns over an escalation of trade war between the US and China pulled down global markets, while the domestic markets are witnessing free fall due to sharp decline in the rupee value.
Two key worries that a sharply depreciating rupee pose for the government are the rising cost of raising funds abroad for Indian companies and the risk of expensive imports, especially petroleum products, feeding domestic inflation.
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The BSE benchmark Sensex drifted lower by nearly 166 points and the NSE Nifty slipped below the 11,500-level in the opening session Friday due to intense selling mainly in banking, power and healthcare shares amid weak Asian cues.
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