The weakness of the Indian rupee is no longer limited to the currency market only, but its direct impact is visible on the stock market as well. The rupee is continuously slipping against the dollar and investors’ worries are increasing. On December 16, the rupee crossed the level of 91 for the first time and reached 91.05 per dollar. Experts believe that if this decline in rupee does not stop, then the hopes of ongoing recovery in the Indian stock market may face a major setback.
The rupee has become the worst performing currency in Asian markets this year. Although the country’s economic growth remains strong and corporate earnings are showing signs of improvement, the weakening rupee seems to be overshadowing these positive signs. Selling by foreign investors has made the situation more serious. In the month of December, foreign institutional investors (FIIs) have withdrawn about $ 1.6 billion from the Indian stock market, whereas they had invested in the previous two months.
selling of foreign funds
Experts say that India is largely dependent on foreign capital to manage its corporate growth and current account deficit. In such a situation, continuous selling of foreign funds may increase pressure on the market and have additional impact on the rupee. According to Akshat Garg, Research Head, Choice Wealth, demand for dollars has increased due to global uncertainty, rising tariffs and challenges related to capital flows, due to which the rupee is witnessing weakness.
Effect of rupee fall
In the month of December itself, the rupee has fallen by about 1.5 percent against the dollar. At the same time, after reaching near its all-time high in November, Nifty 50 has now come down. Weak earnings growth, high valuations and lack of new investment themes are already keeping the market under pressure. In such a situation, the fall of rupee has become a new headache for the market. Many experts believe that if this trend continues, the Reserve Bank of India (RBI) may have to intervene in the market.
Who suffers more from weak rupee?
Not all sectors suffer losses due to rupee weakness. Sectors like IT and pharma, whose major earnings come from abroad, benefit from the weak rupee. This is the reason why IT shares have seen strength in recent months. Despite this, overall weak rupee seems to be posing a major challenge in the way of stock market recovery.
Latest Business News