Rupee continues to trade lower

MUMBAI: The rupee continues to trade lower on fears of further capital outflows from the markets. It is trading at an all time low of 51.76 against the dollar. These fears first started resurfacing after S&P downgraded its sovereign credit outlook on India. It had ended at 51.45 level on Friday.

Dealers said with Asian stocks continuing to lose way and concerns of a rising trade deficit is also weighing on the rupee. BSE Sensex was trading lower 3.7% at 8563 at 3 30pm.

"We are still betting on some form of aggressive RBI intervention curtailing extreme depreciation pressures and subsequently bring the USD/INR pair towards our near-term equilibrium range of 52," says Abheek Barua, chief economist at HDFC Bank in a note. "In short a break beyond 52 could just be temporary," he added.

Bonds are trading range bound and gained marginally on Monday morning after RBI announced a bigger-than-expected buyback auction and as dealers are expecting a rate cut anytime now.

While yield on the old 10-year benchmark 8.24% paper maturing in 2018 fell 3 basis points to 6.31%, the new benchmark 6.05% paper expiring in 2019 traded 1 bps up at 6.01%. When yields fall, prices rise.

RBI has announced another buyback of dated government securities worth Rs 6,000 crore with a green-shoe option of Rs 3,000 crore through an auction on March 5. The next day the government will sell three dated securities for Rs 12,000 crore.

Liquidity was good with call money available at a weighed average of 4.08%, near the reverse repo rate, as per CCIL.