Rupee hits all-time low of 66.30, sensex crashes by 590 points
Mumbai: The battered rupee on Tuesday hit a new low touching 66.30 against the dollar and stocks nosedived on worries the food security programme will widen the fiscal deficit and raise the risk of a rating downgrade.
Weighed down by month-end dollar demand and capital outflows, the rupee fell to 66.30 in late trade before ending at 66.24, down by 194 paise -- the biggest one-day drop ever. The currency has lost over 20 percent in 2013 and is among the worst performers globally.
Stock markets mirrored the rupee fall with the Sensex plummeting over 600 points intra-day. The index finally settled with a loss of 590 points below the 18,000 level. Investor wealth worth Rs 1.7 lakh crore was eroded as participants resorted to panic-selling across the spectrum.
Markets seemed pertubed that the programme to provide subsidised foodgrains to 82 crore people, or two-thirds of population, ahead of elections would add Rs 25,000 crore annually to the food subsidy bill, making it tough for Finance Minister P Chidambaram to curb the fiscal deficit.
While there was no official word on a rating action by global agencies, dealers in financial markets feared the worst. Citing the risk of fiscal slippage, Fitch yesterday warned of a downgrade if the deficit target is missed.
In a bid to allay worries, Chidambaram said: "(Fiscal deficit of) 4.8 percent of GDP and the absolute number indicated in the Budget is a red line and the red line will not be breached...We have provided enough money for the cost of the food security programme for the remainder of the current fiscal."
Gold prices crossed Rs 32,000 level per 10 gram in Delhi and Mumbai. The costlier precious metal is expected to add to government's woes. Gold is one of the biggest import items. In Chennai and Kolkata, it breached Rs 33,000 level.
Yesterday, the landmark Food Security Bill was passed by the Lok Sabha, giving poor people the right to 5 kg of foodgrain every month at Rs 1-3 a kg. The total food subsidy budgeted in the current fiscal is Rs 90,000 crore, of which Rs 10,000 crore is towards implementation of the Food Security Bill.
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