The government’s decision to hike taxes on capital gains from stock investments and equity derivative exchanges caused market anxiety, which caused the Indian rupee to fall to all-time lows on Tuesday.
The rupee fell to a historic low of 83.7150 early in the session before closing little down versus the US dollar at 83.6875, its lowest close ever.
The Reserve Bank of India’s intervention most likely prevented the currency’s collapse. Traders speculated that the central bank probably sold dollars via state-run banks around 83.70–83.72 levels. The BSE Sensex and Nifty 50, which are India’s major equity indexes, finished the day little lower after falling more than 1% earlier.
A trader at a foreign bank stated that although the rupee experienced a “knee-jerk” response to the decline in equity markets, the RBI is unlikely to permit a significant increase in volatility.
For the remainder of the week, the rupee is predicted to gradually depreciate and trade in the 83.57-83.77 range, according to Dilip Parmar, an HDFC Securities foreign exchange research analyst.
India’s fiscal year 2024–25 budget reduced the objective for the fiscal deficit while striking a balance between increased investment on rural development and jobs. The administration reduced its goal for the fiscal deficit in February’s interim budget from 5.1% to 4.9% of GDP. Additionally, it slightly decreased its overall market borrowing to 14.01 trillion rupees. Tuesday saw a small increase in the majority of Asian currencies, while the dollar index was up at 104.3.
