- The Indian rupee breached the psychologically crucial 94-per-dollar mark on Friday
- The ongoing conflict in Iran has disrupted key oil routes, sending crude prices sharply higher
- By 10:20 am on Friday, investors had lost nearly Rs 7 lakh crore in market value
The last trading day of the week is proving punishing for both Dalal Street and the currency market. Ironically, the two moves are feeding off each other. FOLLOW LIVE UPDATES
The Indian rupee breached the psychologically crucial 94-per-dollar mark for the second time on Friday. The domestic unit opened 18 paise weaker at 94.16 against Wednesday's close of 93.98. At the same time, the Sensex slid over 1,000 points by 10:15 am.
The trigger for both lies outside India.
The ongoing conflict in Iran has disrupted key oil routes, sending crude prices sharply higher. For a country that imports over 80 per cent of its oil needs, costlier crude immediately raises concerns about India's import bill, inflation trajectory and fiscal math. That worry is showing up first in the currency market.
As oil becomes expensive, India needs more dollars to pay for imports. At the same time, global investors, spooked by geopolitical uncertainty, are rushing to the safety of the US dollar. This double pressure, higher dollar demand for oil and capital moving into the dollar as a safe haven, is dragging the rupee down.
The currency has weakened roughly 3.5 per cent since the fresh conflict began on February 28.
What's Hurting The Rupee Also Hurting Equities
Foreign investors, wary of rising energy costs and global risk, are pulling money out of emerging markets. A weaker rupee makes Indian assets less attractive in dollar terms, accelerating the sell-off in stocks. The fall in equities, in turn, deepens risk aversion, creating a loop between the currency and the market.
The damage was visible within minutes of trade.
By 10:20 am on Friday, investors had lost nearly Rs 7 lakh crore in market value. The total market capitalisation of the 30 Sensex companies fell to Rs 4,24,15,304.99 crore, down from Rs 4,31,01,834.74 crore at Wednesday's close (March 25).
In effect, the same global event, fears of a prolonged Iran conflict and its impact on oil supplies, is pushing up crude, strengthening the dollar, weakening the rupee, and triggering a sell-off in Indian equities, all at once.
For now, the currency and the stock market are telling the same story: global uncertainty is being priced into Indian assets in real time.
