Rupee falls to 75 for first time, stocks continue to drop as foreigners pull out $10 bn

Agencies

Mumbai: India’s rupee weakened to a new low and stocks slumped anew amid a global meltdown in risk assets, with rising number of coronavirus cases locally adding to anxiety. Sovereign bonds also declined.

The rupee declined as much as 1.1% to 75.0562 per dollar to go past the key 75 mark for the first time. The S&P BSE Sensex index pared losses of as much as 7.5% to still trade at levels last seen in 2017, while the NSE Nifty 50 Index recovered partially from lows seen in the weeks after the government’s cash ban in November 2016.

Global funds have been seeking the safety of the dollar while fleeing stocks, bonds and other currencies, emulating a pattern that was the hallmark of the 2008 global financial crisis, as countries and policymakers continue to ramp up measures to contain the virus epidemic. Foreigners have pulled a combined $10 billion from Indian shares and debt so far this month — the biggest withdrawal since the U.S. taper tantrum of 2013.

“Market sentiment is fragile, risk assets are under pressure and demand for USD remains strong by foreign investors,” said Divya Devesh, head of Asean and South Asia FX research at Standard Chartered Plc. in Singapore. “We expect more INR weakness in the very near-term.” The currency had hit a record low of 74.5250 on Friday.

Traders say the Reserve Bank of India has been using its record foreign reserves to stem the rupee’s decline. The authority was cited selling dollars via state-owned banks in early trade via state-run banks, traders said. On its part, the RBI provided $2 billion of dollar liquidity via a forex swap on Monday, and will provide a similar line on March 23.

The rupee may test 76.50 in the coming days and weeks, according to Abhishek Goenka, chief executive at India Forex Advisors. “In such a risk-averse situation, when investors are unloading equities, bonds and currency, no level has any sanctity.”

Stocks recovered from the day’s lows amid optimism Prime Minister Narendra Modi may add to measures taken to contain the virus and sooth investor sentiment in his address to the nation Thursday evening.