Home Business Rupee weakens to 68.07; stocks slide

Rupee weakens to 68.07; stocks slide

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The rupee breached the psychological 68-to-a-dollar mark on Tuesday to hit a 16-month low as political uncertainty in the wake of Karnataka assembly election results showing the BJP failing to win a clear majority dampened market sentiment.

The rupee opened weak, prompting the central bank to intervene in early trade, dealers said. The currency strengthened in afternoon trade when the BJP’s prospects were looking good but slipped when it became evident the BJP would fall short of a simple majority in the 224-seat assembly. The rupee ended 56 paise lower to close at 68.07 to a dollar, its second-biggest fall in 2018. This is the lowest close for the currency since January 24, 2017, when it had ended at 68.15 against the dollar.

Global cues

Apart from domestic factors, hardening international crude prices weighed on the Indian currency as the rise in oil prices will have an impact on the macroeconomic parameters since the country imports 80% of its crude oil requirement.

Currency traders said there would be pressure on the rupee going forward if oil prices continued to head north. Political developments dominated the stock market too on Tuesday as the benchmark Sensex, which gained more than 400 points in the morning session when early trends showed a majority for the BJP in Karnataka, reversed all gains and closed in the red as it emerged that no single party had got a clear majority.

While the Sensex closed 12.77 points lower at 35,543.94, intraday trade saw the index touching 35,993.53, a rise of 437 points compared with the previous day’s close. The market breadth, which was quite strong with more than 1,500 stocks advancing in the morning session, also turned negative with almost 1,700 stocks in the red as the session came to a close.

The broader Nifty fell 4.75 points to 10,801.85. It touched a high of 10,929.20 during the day.

“The election result is positive for the market irrespective of who forms the government in Karnataka,” said Harendra Kumar, MD, Elara Capital

Siddharth Khemka, head of retail research, Motilal Oswal Securities, said the BJP had emerged as the single largest party and that could “help them in the upcoming general elections”.

“Equity market witnessed increased volatility as the election outcome indicated that BJP was just short of a clear majority. Investors generally like a stable government and a decisive mandate is something markets always take positively,” said Mr Khemka.

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