The Indian rupee breached the psychological 65 mark against the dollar on Tuesday ahead of a key debate on the state of the Indian economy in Parliament. Markets also fell sharply with BSE Sensex slumping over 250 points in early trades.
The partially convertible rupee dropped over 1.6 per cent to hit a low of 65.36 as of 09.20 a.m. against Monday's close of 64.30. It is now trading close to its all-time low of 65.56 hit last week.
Traders attributed month-end dollar demand from importers behind the weakness. Sustained foreign selling in equities also continued to raise concerns about the gaping current account deficit.
Finance Minister P. Chidambaram met foreign investors on Saturday to seek suggestions on attracting dollar inflows, but no big steps have been announced so far.
"The reality on the ground makes it a difficult job for the finance minister to attract FII, FDI flows," currency expert AV Rajwade told NDTV.
Adding to the grim situation is the food security bill passed by the Lok Sabha yesterday. The plan worth nearly $20 billion to provide cheap grain to the poor will hit the fiscal hard, analysts said. It will also stoke inflation making it harder for the Reserve Bank to cut rates at a time when the Indian economy is growing at its slowest pace in a decade.
"But for some extremely creative accounting, it's unlikely that fiscal deficit target will be met this year," Mr Rajwade said.
The Sensex traded 228 points lower at 18,330, while the Nifty traded 76 points lower at 5,400. The rupee traded at 65.36 as of 09.20 a.m.
Source:- profit.ndtv.com
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