Asian shares are trading on a negative note today. The Nikkei 225 is down 0.15% while the Shanghai Composite is trading down by 0.16%.
Back home, India share markets opened the day marginally higher. The BSE Sensex is trading up by 32 points (up 0.1%) while the NSE Nifty is trading up by 13 points (up 0.1%). The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading flat.
Sectoral indices have opened the day on a mixed note with IT stocks and consumer durable stocks witnessing maximum buying interest.
The rupee is trading at 71.26 to the US dollar. The Indian rupee is witnessing selling pressure today as it opened its session to hit a fresh record low of 71.28 against the US dollar.
Yesterday the rupee closed to a record low of 71.21, down 22 paise from Friday’s close of 70.99.
The rupee has been witnessing selling pressure lately on the back of many factors such as rising current account deficit, rising global crude oil prices, and tepid export growth.
It has been falling against the US dollar since the start of this calendar year.
What does the fall in rupee mean for the Indian economy?
A depreciation in rupee means importers buying goods and services at a higher rate than earlier. This doesn’t bode well for a developing economy that relies heavily on imports.
Also, India imports most of its oil requirements. So, a fall in rupee leads to a consequent rise in the import bill. The depreciation of the rupee will also add to crude oil’s rising cost.
On the corporate side, companies who have taken foreign loans from abroad will be impacted. The repayment obligations in terms of principal and interest will rise, leading to a dent in the cash flows and financials.
Further, companies who import most of their raw material requirements will get impacted provided they have not hedged their foreign currency exposure.
