Mumbai: The rupee fell the most in more than a month on concern global funds will sell Indian equities following the biggest plunge in Chinese shares in a decade.
The rupee also is poised to snap a six-month winning streak on speculation the Reserve Bank of India stepped up purchases of dollars to prevent a stronger rupee from hurting growth in exports. Finance Minister Palaniappan Chidambaram will today present the federal budget for the fiscal year beginning 1 April.
“The thing to watch today is the stock market, as a significant loss may see the rupee lower,” said R.K. Gurumurthy, chief currency trader at ING Vysya Bank Ltd. in Mumbai.
The rupee fell 0.3% to Rs44.36 against the dollar as of 9:35 a.m. in Mumbai, from Rs44.215 yesterday, the biggest intraday drop since 10 January, according to data compiled by Bloomberg. Trading in stocks begins at 9:55 a.m. India time. It may drop to Rs44.47 today, Gurumurthy said, based on daily technical charts.
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, had a fifth yearly gain in 2006 and more than doubled in the past two years. Demand from overseas investors rose as the government expects the $854 billion economy to expand a record 9.2% in the year ending 31 March.
Indian stocks are considered more expensive by investors relative to their Asian peers, spurring concern valuations will fall on a sell-off.
India’s Sensitive Index trades at 24.8 times earnings, while China’s Shanghai and Shenzhen 300 Index is valued at 38 times earnings. Morgan Stanley Capital International’s Emerging Market index trades at 15.2 times earnings.