Mumbai: The rupee on Wednesday plunged to fresh depths of 64.54 as RBI measures failed to stem the slide that also dragged down the stock market with the BSE Sensex tumbling by a whopping 340 points to a nearly one-year low.
Investors are worried that the government steps to lift the depreciating rupee may not be adequate to narrow the current account deficit. A weak rupee raises cost of imports like oil and adds to the risk of inflation as India prepares for the next general election by May, 2013.
The day began on a positive note for the rupee and stocks as measures by the Reserve Bank, including an Rs 8,000 crore bond buyback, lifted investor sentiment. The rupee rose to 63.10 against yesterday's close of 63.25. The BSE benchmark Sensex also gained over 321 points, led by bank stocks.
However, dollar strenghtening ahead of the much-awaited release of the minutes of the US Fed's July meeting weighed upon most currencies, including the battered rupee.
The Indian currency crashed to a yet another new low of 64.54 to the dollar and finally settled at 64.11, down 86 paise, on heavy dollar demand and capital outflows. In the past 5 days, it has lost 292 paise.
The rupee also closed below 100-level for the first time in history against the British pound.
"Despite a slew of measures by RBI, rupee is seen giving a muted reaction to the same and going on with weak trend," said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Similarly, Sensex erased hefty morning gains and plummetted over 438 points on heavy selling as the rupee declined. The index closed 340.13 points lower at 17,905.91 -- the lowest since September 2012. Investor wealth worth a whopping USD 100 billion has been lost in four straight days.
"...Bears smelt blood with the spot rupee touching a new all-time low to dollar. This triggered a massive sell-off on Indian bourses," said Amar Ambani, Head of Research at IIFL.
There was some respite for investors in gold as the yellow metal in Mumbai rose by Rs 75 to Rs 31,440 per 10 gms.
In the bond market, the yield on 10-year government securities maturing in 2023 dipped to 8.41 percent from 8.90 percent.
First Published: Wednesday, August 21, 2013, 20:44