The Indian rupee has fallen to its lowest in 2019 so far against the United States dollar. Outflow from the Indian capital market, a broad dollar index strength and a weaker Indian stock markets has led to a slump in the rupee.
On Thursday, the rupee opened at 71.55 and collapsed to 71.98 before ending the day at 71.55 against the United States dollar. Thursday was not a good day for the Indian rupee and stock markets as both had a horrendous run. Sensex deflated by 600 points.
The selling trend of FPIs has affected the rupee severely. The FPI outflow has nearly been USD 3 billion from the Indian capital market in the last two months. The FPIs are citing higher taxation to be an added burden and are not finding the Indian capital market attractive.
Nirmala Sitharaman, the Finance Minister of India, increased the surcharge on the super-rich and FPIs registered as trusts and associations in the Union Budget 2019-20. Finance Minister later clarified that there are no plans of reducing the tax for any reason and this move wreaked havoc and FPIs started pulling out from the Indian markets.
The Indian equity markets are not faring well either as both Sensex and Nifty have plummeted since July 2019. Indian markets were touted to breach record levels post-July 2019, but they have gone in the other direction.
Also, fluctuating oil prices have weighed in on the Indian national rupee. A drop in the United States dollar has caused the oil prices to shoot above USD 60 a barrel. A rise in oil prices often lead to the trade deficit and adversely affects the rupee.
Apart from that, global factors such as the Sino-American trade war and unrest in Hong Kong and Argentina have added to the woes of the Indian rupee. The Chinese yuan has touched its 11 years low against the USD on the back of fresh duties and tariffs imposed by the US government on the Chinese products.
Engineer by qualification, financial writer by choice. I am always open to learning new things.