Rupee slides past 66 per dollar, Sensex falls 590 points

Mangalore Today/DHNS

Mumbai, Aug 27, 2013: Nothing could stop the rupee’s inexorable slide to 66 against the dollar on Tuesday. Not the RBI’s intervention and not the Finance Minister’s repeated assertion that the government is in control of the economic situation. 

The rupee ended at 66.24, a record closing low, after crashing over 3 per cent against Monday’s close of 63.20. It hit all-time low of 66.25 minutes before the closing bell.

 

The crash in the rupee sent the stock markets sharply lower. The BSE Sensex closed 590 points or 3.2 per cent lower at 17,968, while the Nifty closed below the 5,300 levels, falling 189 points.

Deven Choksey, managing director of KR Choksey told NDTV that the culprit is the Bank Nifty, which cracked significantly.

"The RBI’s tight monetary policy has led to rising mark to market losses for banks, who will now have to make significant provisions for these losses. Even safe names like HDFC have taken a hit," he added.

Sustained foreign selling in equities continued to raise concerns about the gaping current account deficit. Overseas investors have sold about $810 million worth of shares in the previous seven sessions through Monday, adding to pressure on the rupee.

Earlier, the Reserve Bank of India (RBI) reportedly sold dollars starting at 65.90 levels, but after a brief recovery, the rupee was back to its losing ways.

Meanwhile, Finance Minister P Chidambaram reiterated that the rupee has overshot its true level.

"We have to be patient and firm and do what is required to be done. Rupee will find its appropriate value," he said.

Mr Chidambaram also sought to allay fears that the $20-billion Food Security Bill passed by the Lok Sabha last night will widen India’s alarming fiscal deficit even further.

"4.8 per cent of GDP is a red line as far as fiscal deficit is concerned. This red line will not be breached," the finance minister said.

His comments failed to convince investors though. "The Food Security Bill is the key reason for the rupee’s fall today. It would open floodgates for (credit) ratings downgrades, if the fiscal deficit is not reined in," Ashtosh Raina, head of foreign exchange trading at HDFC Bank told Reuters.

"The trinity of the fiscal deficit, slowing growth and an unstable currency is hitting us badly. In addition to these, the government has passed the Food Security Bill which may put fear in the mind of rating agencies," G. Chokkalingam, managing director and chief investment officer of Centrum Wealth Management told Reuters.

There were contrarian views too. Mehraboon Irani of Nirmal Bang Securities told NDTV that markets knew the Food Bill was coming.

"It’s not going to impact us in this fiscal year," he added.