Indian Rupee's Downward Spiral Continues

The Indian rupee has once again taken a hit, falling by 13 paise to a new record low of 85.87 against the US dollar. This marks the second consecutive session of decline, driven by higher crude oil prices and a stronger American currency. The situation is further exacerbated by a lackluster sentiment in domestic equity markets and the continuous outflow of foreign funds.

At the interbank foreign exchange, the rupee opened at 85.82 and plummeted to an all-time low of 85.89 during intra-day trading before settling at 85.87 (provisional) against the dollar. This represents a 13 paise drop from its previous close.

Global Economic Factors at Play

Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, saw a 0.35% increase, trading at 108.76. The 10-year US bond yields remained high at 4.67%, reflecting expectations of delayed interest rate cuts by the Federal Reserve. Additionally, Brent crude futures climbed 0.90% to USD 77.74 per barrel.

Domestic Market Reactions

In the domestic equity market, the 30-share BSE Sensex fell by 50.62 points, or 0.06%, to settle at 78,148.49 points, while the Nifty dropped 18.95 points, or 0.08%, to 23,688.95 points. Foreign institutional investors (FIIs) were net sellers in the capital markets, offloading Rs 1,491.46 crore on Tuesday.

The latest government data indicates a projected slip in India's economic growth rate to a four-year low of 6.4% in 2024-25, attributed to poor performances in the manufacturing and services sectors. This would be the lowest growth rate since the COVID-19 year of 2020-21, which saw a negative growth of 5.8%.