After trading on a volatile note throughout the day, share markets in India witnessed selling pressure during the closing hours and ended the day in red. All sectoral indices traded in red, with stocks in the energy sector and consumer durables sector leading the losses.
At the closing bell, the BSE Sensex stood lower by 174 points (down 0.5%) and the NSE Nifty closed down by 47 points (down 0.5%). The BSE Mid Cap index ended the day down 0.1%, while the BSE Small Cap index ended the day down by 0.5%.
The rupee was trading at Rs 72.32 against the US$ in the afternoon session.
Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.1% and the Shanghai Composite was up by 0.2%. The Nikkei 225 was down by 1.3%. Meanwhile, European markets were also trading on a negative note. The FTSE 100 was down by 0.4%. The DAX was down by 0.6%, while the CAC 40 was down by 0.4%
In the news from currency markets, the rupee hit a fresh record low of 74.28 against the US dollar today.
The selling pressure came on the back of rising crude oil prices and strengthening of the US dollar overseas.
Apart from the above, foreign fund flows also weighed on the rupee.
Note that the rupee has been witnessing selling pressure 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 that 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.
