Do markets give a damn about rupee slide?

By ZRG | Updated: Jun 12, 2013, 19:13 PM IST

Siddharth Tak and Rohit Joshi/Zee Research Group

Is there a link between stock market and rupee movement on intra-day trading? Perhaps not, as the Indian rupee breaching the key psychological mark of 58 on Monday didn’t affect the stock markets that day.

While markets may not remain entirely immune to rupee movement, a Zee Research Group (ZRG) study of S&P BSE Sensex data reveals that most of the times Indian market has remained indifferent on the particular day when rupee has closed below key levels of 57 and 58.

While, the rupee closed at a low of 57.12 on June 22, 2012, Sensex was down only 0.35 percent. Similarly, on June 26, 2012 and June 27, 2012 rupee again closed at levels of 57.05 and 57.15 respectively. What is more interesting, Sensex increased 0.5 percent and 0.36 per cent on June 26, 2012 and June 27, 2012 respectively.

The trend continues this year when the rupee closed at 57.06 on June 7, 2013, the first time since June 27, 2012. Correspondingly, Sensex declined by 0.46 percent. On June 10, 2013 too, rupee closed below 58 mark at 58.15 but Sensex remained unaffected and markets closed with gains of nearly 12 points or 0.06 per cent on the same day. However, on June 11, 2013 rupee touched life time low levels of 58.98 against dollar and closed at 58.39. Taking a note of it, Sensex fell by 1.53 per cent on June 11, 2013.

Explaining the trend, Jagannadham Thunuguntla, Equity Head at SMC Capitals opined, “It depends on the situation, during 2011-12 there was a direct relation between the rupee downfall and the Indian markets. However, nowadays the driving force is yen not the dollar and therefore dollar movement is not affecting our markets.”

Anis Shaikh, an independent analyst who closely tracks the rupee movement is in sync with Thunuguntla.

“There is no day to day correlation between the rupee downfall and Indian market. Whenever the market is increasing, rupee is either stable or appreciating. In case, when the rupee is deprecating market may not crash or decline at the same time but one can witness marginal correction in the Indian market,” he averred.

Market does respond to rupee movement, argued Ambareesh Baliga, managing partner at Global Wealth Management, Edelweiss Financial Services.

“Whenever rupee falls, there is a correction in the markets. In long term, the rupee fall doesn’t affect the Indian market but it certainly affects it in short term,” he stressed.