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Rupee falls 10 paise to 70.89 against US dollar in early trade

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Rupee

Mumbai | The rupee depreciated by 10 paise to 70.89 against the US dollar in early trade Wednesday at the interbank foreign exchange amid strengthening of the US dollar against some currencies overseas.

Forex traders said besides increased demand of the US currency from importers, the dollar’s strength against some currencies overseas weighed on the rupee but a higher opening of the domestic equity markets, capped the losses. The rupee opened lower at 70.88 per dollar against and dropped further to quote at 70.89, 10 paise down over its previous close.

The rupee recovered by 8 paise to close at 70.79 against the US dollar Tuesday on increased selling of the greenback by exporters and softening crude oil prices.

Meanwhile, on net basis, foreign funds bought shares worth Rs 811.52 crore, while DIIs purchased share to the tune of Rs 31.21 crore Tuesday, provisional data showed.

The BSE benchmark Sensex opened on a positive note for the third successive session, rising nearly 200 points, on positive global cues ahead of key G20 and Opec meetings. The NSE Nifty too witnessed similar movement, and was trading 35.20 points, or 0.35 percent, lower at 10,725.60.

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The insider of the Monetary Policy Committee meeting of the RBI

Akhilesh Bhargava

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The recent meeting of the Monetary Policy Committee of the Reserve Bank, took place with a much better macro economic environment. Crude oil prices have fallen sharply, the rupee has started gaining strength, capital inflows are increasing, there is a pick up in investment activity led by the government, there is an increase in capacity utilisation, a rise in exports, an improvement in credit off take, inflation remains subdued and with a retreat in commodity prices, corporate profits should look upwards. What happened in the meeting? Mr. Akhilesh Bhargava, Business Editor of HW Business and Finance shares his insights on the matter.

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Business & Finance

Sensex tumbles 714 points as exit polls show Congress-BJP neck-and-neck in state elections

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Mumbai | Market benchmark Sensex buckled under heavy selling pressure Monday, plummeting 714 points as investors panicked over exit polls suggesting the Congress giving a tough fight to the ruling BJP in state elections as also the bruised rupee and weak global cues further dampened sentiment.

The BSE Sensex cracked below the 35,000 mark, plunging 713.53 points, or 2 percent, to close at 34,959.72. Similarly, the broader NSE Nifty fell 205.25 points, or 1.92 percent, to 10,488.45.

Exit polls for the recently concluded assembly elections have predicted a tight finish between the ruling BJP and the Congress in Madhya Pradesh and Chhattisgarh and a win for the opposition party in Rajasthan, impacting trading pattern on the domestic bourses in a big way.

Besides, a weakening rupee, which hit 71.44 per dollar intra-day, and fresh foreign fund outflows further pulled the key indices. All sectoral indices on the BSE and NSE ended in the red, led by realty, banking, metal, pharma, pharma and financial stocks.

Kotak Bank shares cracked over 6 percent after the bank said it had moved the Bombay High Court against RBI’s decision with respect to the bank reducing promoter holding using preference shares. In August, Uday Kotak, the founder and promoter of Kotak Mahindra Bank, has pared down his stake in the bank to 19.70 percent from about 30 percent following the issuance of preference shares.

Within a few days, the Reserve Bank said the stake dilution by Kotak does not meet its regulatory norms on the same, something the private sector lender contested. Other top losers include Reliance Industries, Asian Paints, Tata Motors, Adani Ports, Bharti Airtel, Sun Pharma, L&T, PowerGrid, HDFC, Axis Bank and Bajaj Auto, falling up to 4 per cent.

Coal India and Maruti were the only two gainers on the 30-share index, rising up to 0.79 per cent. Multiple factors impacted the market sentiment as the bears held complete control of the market from opening till the closing bell, said Joseph Thomas, Head Research, Emkay Wealth Management.

This was the biggest one-day fall in the last two months for both indices, falling up to 2 per cent, he said.  On a net basis, foreign portfolio investors (FPIs) sold shares worth Rs 817.40 crore Friday, while domestic institutional investors (DIIs) were net buyers to the tune of Rs 242.56 crore, provisional data available with BSE showed.

Brent crude oil futures was trading at 0.31 per cent down at USD 61.48 per barrel. Elsewhere in Asia, Korea’s Kospi fell 1.06 per cent, Japan’s Nikkei dropped 2.12 per cent, Hong Kong’s Hang Seng shed 1.19 per cent and Shanghai Composite Index tumbled 0.82 per cent.

In Europe, Frankfurt’s DAX shed 0.67 per cent and Paris’ CAC 40 fell 0.47 per cent in early deals. London’s FTSE too slipped 0.41 per cent.

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Important for Indian govt to heed RBI’s message on financial stability: IMF Chief Economist

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RBI

“I think their (RBI) message that financial stability is important is correct. And it is important for the government to heed that,” Obstfeld said.

 

Washington| It is important for the Indian government to heed the RBI’s message on financial stability, IMF‘s Chief Economist Maurice Obstfeld said Sunday, amidst reports of friction between the central bank and the Finance Ministry.

Addressing a group of journalists here, he also said the International Monetary Fund does not want politicians “manipulating” central banks for political ends.

“There is debate over whether it’s better for financial stability to be the remit of the central bank or an independent regulator…the UK in 1997, split them, then put them back together again. I’m not going to take a position on that…But I think…the central bank does have to be intimately concerned with financial stability to some degree and with the payment system,” he said, responding to a specific question on the recent developments in India regarding the RBI and the government.

“We need to think about what is the best institutional framework in which fiscal policy can be set with regard to the long-term stability of the economy, not just to performance over political horizon,” Obstfeld said.

“Well, I think they (the RBI and the Indian government) have reached an agreement on how to proceed. I think their (RBI) message that financial stability is important is correct. And it is important for the government to heed that,” he added.

Responding to a series of questions on the attempt in certain countries like the US, India, Argentina and Turkey to curb the independence of central banks, Obstfeld said central banks’ role as a financial regulator is critical.

Central banks have “much greater power than you thought”. They are fundamentally involved in financial stability policy, in fiscal policy, he said.

Obstfeld said if one looks at the record, the decisions taken by central banks worldwide did stabilise the economy by avoiding much worse losses in output and employment.

However, at the same time, he said, their moves also raised questions of transparency and accountability.

“So, it’s not a shock that people raise these questions and it does create a challenge for central banks to be more transparent and to communicate more effectively with a broader public about what they are about and what they are doing,” Obstfeld said.

If the central bank cannot communicate more effectively about what it is doing, then there is a possibility of political manipulation where politicians attack the central bank and undermine it, he said.

“Clearly, we don’t want politicians manipulating the central bank for political ends,” Obstfeld added.

After serving as IMF’s Chief Economist for more than three years, 66-year-old Obstfeld is set to retire this month-end and will return to the University of California, Berkley. Gita Gopinath, Indian American economist from the Harvard University, would replace him from the first week of January.

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