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Business News/ Opinion / Online-views/  Rupee falls on fears stock market declines will spur capital outflows
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Rupee falls on fears stock market declines will spur capital outflows

Rupee falls on fears stock market declines will spur capital outflows

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Mumbai: The rupee fell Thursday on speculation that losses in the nation’s equity market will prompt overseas investors to reduce local share holdings.

The currency weakened after the Bombay Stock Exchange’s benchmark index, the Sensex, had the biggest two-day decline in more than two weeks. The Sensex fell 13% in January, the most since May 2006, as funds based abroad sold a record $4.3 billion (Rs16,985 crore) in Indian equities.

“Stocks are down and that dragged the rupee lower," said L.V. Prasad, chief currency trader at IndusInd Bank Ltdin Mumbai. “The dollar was in good demand in the second half of the day, probably because of capital outflowsfrom stocks."

The rupee declined to 39.54 per dollar at close, from 39.5225 on Wednesday, according to data compiled by Bloomberg.

The Sensex fell 3.4%, adding to Wednesday’s 2.8% loss. It has declined 0.7% this month.

Growth in Asia’s third largest economy may slow to 8.7% in the 12 months to 31 March, the weakest pace since 2005, the statistics office said in a release in New Delhi on Thursday. Growth was 9.6% last financial year.

The rupee gained earlier on speculation Reliance Power Ltd may have completed the refunding of excess bids received at a share sale held last month. Reliance Power held the nation’s biggest initial share sale from 15 January to 18 January to raise Rs11,700 crore.

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Published: 07 Feb 2008, 11:52 PM IST
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