The rupee on Tuesday closed at a six-month low of Rs 71.39 against the greenback and is near its weakest level this year, as global risks weigh on the rupee coupled with a slowdown scenario in the domestic markets.
According to currency market participants, the growing negative sentiments with respect to key sectors under-performing and constant foreign fund outflows from equity markets has led the rupee to loose its sheen. Furthermore, global funds are holding back bets as they wait for further government initiatives like tax concessions.
M V Srinivasan, vice-president, Mecklai Financial, said, "There is a sense of negativity in the domestic front as key sectors like auto and the realty sector is facing a slowdown which has led the rupee to fall to current levels. In addition, foreign players are holding bets and are looking for further government initiatives." The rupee has depreciated nearly by 3.5% in the past six weeks.
The most traded bond - 7.26% yielding paper maturing in 2029 - closed Tuesday's session at 6.53%, three basis points (bps) higher than the previous close. Foreign portfolio investors (FPIs) have pulled out close to $1.5 billion from Indian equity markets as on August 9, while they invested close to $165 million into Indian debt instruments. "The market would not like to wait long on certain initiatives like FPI tax concessions, there were hopes but nothing substantial has come yet," said Sajal Gupta, head-forex, Edelweiss. "The fall in the equity markets coupled with the depreciation in the Chinese Yuan has also led to the fall in the rupee," added Gupta.
The dollar index was flat at 97.42 against the previous close on Friday. According to provisional data, FPIs pulled out nearly $90 million from the Indian equity market on Tuesday.