Mumbai: India’s rupee weakened the most this month on speculation that slowing economic growth will discourage overseas investors from buying the nation’s assets.
The currency dropped for a third day, the longest stretch of losses in seven weeks, as a drop in local equities added to concerns that global funds will scale back purchases of shares. Asia’s third biggest economy may have expanded 6.6% in the 12 months ended 31 March, the slowest pace in six years, the Reserve Bank of India (RBI) said in a report on Monday, citing forecasts it had compiled from 14 agencies, including the World Bank.
The rupee will maintain a weakening bias in the medium term due to the poor economic outlook, said K.V. Mallik, treasurer at UCO Bank in Kolkata.
The rupee fell 0.9% to 50.325 per dollar, according to data compiled by Bloomberg. That is the lowest closing level since 2 April. The currency has gained 0.8% this month, following five quarters of losses, the longest run of declines since 2002.
India’s $1.2 trillion (Rs60 trillion) economy may expand as little as 5.7% in the year that started 1 April, RBI said, citing the survey.
The central bank, which on Tuesday unveils its growth forecast for the current fiscal year, said a slowdown in industrial production, deceleration in private consumption and investment demand and declining exports are the big concerns facing the economy.
The Bombay Stock Exchange’s Sensex lost 0.4%, the second decline in three days. The index has added 13% this month as funds based abroad bought $1.02 billion more Indian shares than they sold, data released by the Securities and Exchange Board of India showed.
A rally in global stocks is likely to falter as a prolonged recession dents corporate earnings, according to State Street Global Advisors Inc.
“We’re likely to see a pullback in stock markets as earnings disappoint,” said George Hoguet, global investment strategist at the Boston-based State Street Global Advisors.
Offshore contracts show traders are betting the rupee will weaken to 50.58 to the dollar in a month, compared with expectations for a rate of 50.01 on 17 April.