Depreciating for the second straight session and recording its single biggest fall in 15 months, the rupee weakened by nine paise against the US dollar on Wednesday, June 30, to settle at 74.32, amid a firm American currency and rising crude oil prices - both of which weighed on investor sentiment. At the interbank foreign market, the local unit opened at 74.23 against the dollar, the same as its previous close mark, hovering in the range of 74.23 to 74.45 during the session. In an early trade session, the local unit weakened by two paise to 74.25 against the greenback.
Rupee Reports Biggest Monthly Fall In 15 Months
Pressured by high crude oil prices and concerns over the US Federal Reserve indicating at unwinding its stimulus, the domestic currency today registered its biggest monthly drop, since the onset of the COVID-19 pandemic in India in March 2020. According to traders, the month-end demand for the dollar from the oil importers was one of the main factors driving the unit lower, while the weaker domestic equities also hurt the currency's sentiment.
In June 2021, the local unit declined 2.4 per cent, in its biggest fall since March 2020 when it plunged 4.6 per cent. Also, over the quarter, the domestic unit lost 1.7 per cent, recording its worst quarterly fall since January-March 2020 when it declined 5.8 per cent.
Moreover, India imports over two-thirds of its oil requirements, and the rising oil rates could add to the inflationary concerns. This could complicate the policy-making process for the Reserve Bank of India (RBI) - which plans to keep the monetary policy accommodative to support the COVID-hit economy.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.05 per cent to 92.09.
What analysts say on rupee's weakness today:
Mr. Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services:
“The rupee is on an edge, for which the greater sensitivity probably lies towards stronger US data and a stronger dollar. Overall, fx market is focusing on a potentially hot US labour report or the degree to which new covid variant reduces recovery expectations.
So until the USDINR spot trades above 73.75-73.80, it will remain afloat with immediate resistance around 74.50 and then 74.75 zone. While the major supports lie around 73.75-73.50-73.45.”
Mr Amit Pabari, MD, CR Forex:
''Domestically, for the past week, Indian equities don't seem promising for FII as they sold stocks for the sixth consecutive day worth almost Rs 5080 crores. Investors fear that the spread of the delta virus variant could further add to lockdown restrictions and impact economic growth. That apart, market participants pledge that the new support measures by the government may provide some temporary relief but would not be sufficient to boost the economy.
The continuing rising oil prices are adding pressure to the rupee. This could turn negative for domestic markets in addition to the global risk-off sentiment and could take flows back to safe heaven US. Broadly, the Indian Rupee is likely to trade sideways in the range of 73.70-74.50 zone in the near term before any big market trigger takes it towards 75.00-75.20 levels in the upcoming time.''
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 66.95 points or 0.13 per cent lower at 52,482.71, while the broader NSE Nifty declined 26.95 points or 0.17 per cent to 15,721.50.
For the most part of the day, the benchmarks traded on a positive note tracking strength in index heavyweights - Tata Consultancy Services, Infosys, Reliance industries, and Maruti Suzuki. But, banking shares such as HDFC, ICICI Bank, HDFC Bank, and Bajaj Finance witnessed late selling pressure which removed intra day gains.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:
"For the third day in a row consecutive day, Nifty failed to sustain at higher levels and closed at the lowest point of the day. In the absence of any specific news flow from the domestic markets, domestic markets followed global cues which are trading with negative bias. The dollar index held gains that would keep the sentiment of the market subdued.
Technically, the market has formed a double top at 15835 levels and closed below the lowest of the previous day, which was at 15724. Based on that, Nifty would fall to 15650-15620 levels. However, as the underline trend of the market is still positive and range-bound, our strategy should be to buy between 15650-15600 levels.''
Meanwhile, according to exchange data, the foreign institutional investors were net buyers in the capital market on June 30 as they purchased shares worth Rs 116.63 crore. Brent crude futures, the global oil benchmark, advanced 0.72 per cent to $ 75.30 per barrel.