By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee fell to a record low on Tuesday as the government’s hike in taxes on capital gains from equity investments and on trading in equity derivatives dented market sentiment.
The rupee closed slightly lower against the US dollar at 83.6875, its weakest-ever close, after slipping to a record low of 83.7150 earlier in the session.
An intervention by the Reserve Bank of India is likely to curb the currency’s decline. Traders said the central bank, through state-run banks, was likely to have sold dollars near 83.70-83.72.
India’s leading equity indices BSE Sensex and Nifty 50 closed slightly lower after falling more than 1 percent earlier in the day.
While the rupee reacted “knee-jerk” to the decline in equity markets, the RBI is unlikely to allow a sharp rise in volatility, a trader at a foreign bank said.
According to Dilip Parmar, foreign exchange analyst at HDFC Securities, the rupee is likely to witness gradual depreciation later this week and trade in a range of 83.57-83.77.
India’s budget for fiscal year 2024-25 struck a balance between higher spending on jobs and rural development while reducing the fiscal deficit target.
The government lowered its fiscal deficit target to 4.9 percent of gross domestic product, below the 5.1 percent target set in the interim budget in February. It also marginally reduced its gross market debt to Rp14.01 trillion.
Most Asian currencies rose slightly on Tuesday, with the dollar index rising slightly to 104.3.
(Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala)
