Rupee sinks to 6-month low; Gold pips stocks
Re fell as worries about foreign investors repatriating their capital gripped the market. BSE Group A Losers | BSE Group B Losers | NSE Losers | In pics: Sensex fall
By Agencies |
MUMBAI: The rupee fell sharply to its lowest in six months on Monday, as worries about foreign investors repatriating their capital gripped the market after local stocks tumbled to their worst in nearly seven months.
The partially convertible rupee ended at 40.72/73, off an early low of 40.84, its weakest since September 6, according to media data. It closed at 40.435/445 on Friday.
India's benchmark share index Sensex slid 6 per cent, with investors rattled by news of an emergency US Federal Reserve discount rate cut and the distress sale of investment bank Bear Stearns.
Stock markets across Asia also declined on Monday, with Japan's Nikkei closing at its lowest in two-and-a-half years. "This has been bearish for the rupee and we have seen demand (for dollars) from custodial banks and importers," said Agam Gupta, head of currency trading at Standard Chartered Bank, referring to banks doing business on behalf of overseas clients.
India, which imports nearly 70 per cent of its crude oil, runs a current account deficit and outflows of foreign capital can put downward pressure on the rupee.
The partially convertible rupee ended at 40.72/73, off an early low of 40.84, its weakest since September 6, according to media data. It closed at 40.435/445 on Friday.
India's benchmark share index Sensex slid 6 per cent, with investors rattled by news of an emergency US Federal Reserve discount rate cut and the distress sale of investment bank Bear Stearns.
Stock markets across Asia also declined on Monday, with Japan's Nikkei closing at its lowest in two-and-a-half years. "This has been bearish for the rupee and we have seen demand (for dollars) from custodial banks and importers," said Agam Gupta, head of currency trading at Standard Chartered Bank, referring to banks doing business on behalf of overseas clients.
India, which imports nearly 70 per cent of its crude oil, runs a current account deficit and outflows of foreign capital can put downward pressure on the rupee.
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"So the trade flows against the rupee, they need to be funded by capital flows. If the equity markets are weak, that clearly weighs on the rupee more than it would on most other currencies," said Pradeep Khanna, head of trading at HSBC.
Overseas investors sold $364 million of Indian stocks last week, taking the outflow to about $3.5 billion this year, according to data provided by the stock market regulator. Foreigners had bought $17.4 billion in local shares last year, causing the rupee to appreciate more than 12 per cent against the dollar.
Gold outshines stocks in returns
With bears running amok on Dalal Street, investment in equities has become less than half as attractive as the that in gold.
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Moreover, the precious metal is likely to glitter more in the bullion markets as there is no sign in sight of bulls returning to stock markets. An analysis of the past one year performances in the two markets shows that the returns have been close to 40 per cent for investors in gold. In comparison, today's heavy plunge in the stock market benchmark Sensex to sub-15,000 level dragged down the equity return to less than 20 per cent for the same period.
The gold prices were being quoted at all-time high levels of near Rs 13,500 per 10 gram in the bullion market today, representing a gain of over Rs 4,000 over its year-ago level, when it was being quoted near Rs 9,350 per 10 gram level.
In comparison, with day's 951-points plunge - its second biggest ever -- the Sensex dropped to 14,809.49 points, which represents a gain of just about 17.7 per cent over its year-ago level of 12,644.99 points.
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Even silver has seen an appreciation of nearly double of the same in the Sensex over the past one year. The silver prices, currently being quoted at record high levels near Rs 25,500 per kg, has gained nearly 30 per cent over its year-ago level of about Rs 19,500. Gold and silver prices would continue to gain as long as pressure continues on US dollar, domestic brokerage firm SMC Global's Vice-President Rajesh Jain told reporters.
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"Gold and silver prices may continue to gain ground over the next few months, as it could take some time for equity markets to recover," Jain added. Download
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