Mumbai: Breaking the streak of severe battering it suffered in the last few days, the rupee on Thursday soared by a staggering 225 paise to end at 66.55 against the dollar and the Sensex jumped by over 400 points on the back of RBI opening a special dollar facility for PSU oil companies.
After the rupee plunged to an all-time low of 68.85 yesterday, the RBI allowed the three state-owned oil companies to buy dollars directly, the latest in a series of moves to arrest volatility in the domestic currency, which has slid over 20 percent since April 30.
With PSU oil firms needing USD 8.5 billion every month to import 7.5 million tonnes of crude oil, the swap window will help to ease demand in the spot market. The rupee bounced back to 66.51 before ending at 66.55, a rise of 225 paise or 3.27 percent -- the biggest single-day rise in 15 years.
"The separate forex swap window for oil firms by RBI helped rupee gain. The depreciation was overdone," said Ashutosh Khajuria, President - Treasury, Federal Bank.
Mirroring the currency, the Sensex surged 405 points today, the biggest gain in a week. Stock investors gained over Rs 1 lakh crore on across-the-spectrum rise in share prices.
Prime Minister Manmohan Singh said he would make a statement in Parliament tomorrow, after opposition parties claimed there was panic in the country over the rupee's fall.
Some experts are sceptical about today's turnaround as markets seemed to ignore concerns related to widening current account deficit and the burden of food subsidy that have plagued investor sentiment recently.
"The sustainability....Will be closely watched as RBI had taken a similar measure in 2008, that gave short-lived relief," said Abhishek Goenka, CEO, India Forex Advisors.
Bank of America Merrill Lynch said in a report today the RBI will have to take far more pro-active steps to rebuild forex reserves, because if the status quo remains, the rupee could touch 75 per dollar by the end of 2014.
Driven by the recovery in the rupee, gold prices in the national capital fell from record high, plunging Rs 1,575 to Rs 32,325 per ten gram on profit-selling by stockists amid a weakening global trend.