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Rupee Touched An All Time Low Of 80.79

The rupee plunged by 83 paise — its biggest single-day loss in nearly seven months —  touched an all-time low of 80.79 against the US dollar. The rupee touched the psychological level of 80 per dollar, but closed just below that mark at 79.98, amid foreign fund outflows and the rise in crude oil prices.

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Possible Reasons:

The rupee had opened strong at 79.75 but fell again towards the 80 level, this time on the back of a supportive range from crude as Brent breached the $100 per barrel on less chance of recession in the US, said Jateen Trivedi, VP–research analyst at LKP Securities. “The rupee keeps taking resistance every time it rises towards the 20-day moving average. The rupee range can be seen between 79.75-80.50,” he added.

Forex reserves have plummeted by $62.4 billion from the record high of $642.45 billion registered on September 3, 2021. A major reason for the decline in forex reserves is capital outflows by foreign portfolio investors (FPIs) as the US Federal Reserve started the monetary policy tightening and interest rate hikes. The valuation loss, reflecting the appreciation of the US dollar against major currencies and decline in gold prices have also played a part in the decline in foreign exchange reserves. The RBI had also occasionally sold dollars from the forex kitty to prevent a major slide.

Stock Market Performance:

Meanwhile, the benchmark Sensex shot up by 760.37 points to 54,521.15 in the bull rally led by IT stocks. The NSE Nifty index gained 229.30 points at 16,278.50. Among sectors, IT, metals, capital goods and banks were the main gainers while FMCG index ended marginally in the red. The broad market indices – smallcap and midcap indices — ended up in line with the Nifty, while the advance-decline ratio was 2.8:1.

World stocks rose on Monday as scaled back bets on the latest US Fed rate hike next week and support pledges for China’s economy lifted the mood. Investors are seen staying a bit cautious ahead of a European Central Bank policy meeting and a scheduled resumption of Russian gas flows via the Nord Stream 1 pipeline.

Growth Prospects:

Morgan Stanley has slashed its forecast for India’s economic growth for this financial year and the next in view of a slowdown in global growth. The growth forecast for the country’s gross domestic product (GDP) for 2022-23 has been lowered by 40 basis points to 7.2 per cent, while that for 2023-24 has been reduced by 30 basis points to 6.4 per cent.

Vinod Nair, head of research at Geojit Financial Services, said, “Strong US retail sales data scaled down the worries of an aggressive rate hike higher than 75 bps providing the much-needed optimism to global equities. The European Central Bank, in its meeting this week, is set to increase its interest rates for the 1st time to contain record-high inflation. On the domestic front, while IT and banking stocks were lifted by bottom fishing, realty stocks accumulated gains on improving business prospects.”

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