The rupee fell nearly 0.6% against the dollar on Wednesday, with sentiment dampened by the country’s failed to live up to expectations growth estimates and as the escalations of Russia’s invasion of Ukraine continued to tarnish the mood.
The significant fallout from Western sanctions against Russia after it launched a “special operation” in Ukraine is a sharp rise in oil prices, which crossed the $110 a barrel mark for the first time in seven years.
The energy-sensitive rupee finished at 75.77, nearly 0.6 percent lower than its previous closing price of 75.33 on Monday. Indian stock markets were closed on Tuesday due to Mahashivratri.
“The USDINR (dollar/rupee) spot closed 36 paise at 75.70 on the back of rising oil prices. Reserve Bank of India (RBI) intervention may have been responsible for the pair not moving above 75.85 levels” , said Anindya Banerjee, deputy vice president. President, Currency Derivatives and Interest Rate Derivatives at Kotak Securities.
“In the near term, we expect prices to trade with an upward tendency. We see a range of 75.40 and 76.30 levels,” he added.
Data showed India’s economy grew 5.4% in the October-December quarter, a slower pace than the previous two quarters, and less than 6 percent predicted by economists in a Reuters poll.
That data was from a time before the disruptions and newfound restrictions of the ommicron variant of the coronavirus took effect.
Now fears are growing that the fallout from Russia’s invasion of Ukraine will further erode economic growth.
Investors’ gloomy mood was mirrored in domestic exchanges, with the BSE Sensex falling 1.38 percent to close at 55,469 and the broader NSE Nifty down 1.12 percent to settle at 16,606.
“Nifty is falling as the focus remains on geopolitical tensions. The Russian invasion of Ukraine continued to push the benchmark Nifty higher as investors remained risk averse amid oil prices which rose to their highest level since 2013,” said Prashanth Tapse, Vice President for Research at Mehta Equities.
“We suspect the markets will behave wildly, and any weak rebound attempt will be wiped out again by bears around Nifty’s 17000-17150 zone,” he added.