Rupee plunge: Losses double for FIIs in Indian stocks
New Delhi: A free-fall in rupee, which on Wednesday touched a historic low below Rs 56-level against US dollar, has doubled the losses for foreign investors in Indian stocks, as against their domestic counterparts.
While the stock market as such has been on a declining trend in the recent past, the concurrent plunge in rupee has compounded the losses for FIIs (Foreign Institutional Investors) and other overseas entities to nearly double the loss for domestic investors, shows the stock exchange data.
In the past one month, the stock market's 30-share benchmark Sensex has plunged nearly 7 percent. The decline is much steeper at about 14 percent for Dollex-30 (the dollar- linked counterpart of the Sensex) during the same period.
For the past one-year period also, the Sensex has declined by about 14 percent, while the Dollex-30 has plunged nearly 28 percent, the BSE data shows.
It is a sharp depreciation in the Indian rupee's valuation against the US dollar that has led to this steeper fall in the Dollex value. The rupee has lost nearly five per cent against the dollar in the last one month alone, while it has fallen nearly 20 percent in past one year.
Market analysts believe that a weaker rupee erodes the return which foreign investors make in dollar terms.
"Fresh demand for the American currency from banks and importers due to higher dollar in the overseas market mainly affected the rupee's value against the dollar," said Moses Harding, Head - ALCO and Economic & Market Research, IndusInd Bank.
The rupee on Wednesday slipped below Rs 56-level against the US dollar, as against near Rs 52-level a month ago. The Indian currency has been consistently hitting record lows lately and today it slumped to a new record low of 56 to the dollar.
"The Indian rupee has witnessed a fall of over 20 percent in the last one year against US dollar.
This steep fall creates challenges for the economy - domestic businesses that have foreign currency borrowing are negatively impacted, foreign investors prefers to stay away from the capital markets as fall in the rupee heightened their losses," T S Srinivasan, GM (Treasury) of Indian Overseas Bank said.
"In addition, domestic liquidity conditions aggravated as RBI intervenes to check heightened volatility in rupee," he added.