Rupee closes at record low, nears 94 mark; Ambit expects another 7.5% correction

The Indian rupee closed at a record low today as US dollar rose and FIIs continued offloading equities amid the ongoing war in West Asia. The rupee ended 82 paise lower at a record low of 93.71 against the US dollar. The currency closed at an all-time low of 92.89 on Wednesday. Forex markets were closed on Thursday on account of Gudhi Padwa.

During the session today, the currency fell below the 93 per dollar mark for the first time ever. 

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said, "The rupee witnessed sharp weakness, depreciating to 93.71 against the dollar as markets aggressively priced in the negative impact of elevated crude oil prices. Sustained strength in crude is expected to significantly widen India’s import bill, putting continued pressure on the domestic currency. In the near term, the rupee is expected to trade in a weaker range of 93.00–94.25 against the US dollar."

Ambit Capital in a report said it expects the rupee to depreciate by 6.5-7.5% in the next one year. 

"As we expect current account deficit (CAD) to widen and capital account data to remain volatile, past data shows that oil at $90-110/bbl can cause the rupee to depreciate by 6-7.5%. This is because, with oil prices staying high longer, USD/INR can end at 97.5 to 98.9 in the absence of other positive triggers," said the brokerage.  

Dilip Parmar, Senior Research Analyst, HDFC Securities said, "The Indian rupee resumed its downward spiral to fresh record lows following Thursday’s holiday, battered by a 'double whammy' of persistent foreign fund outflows and surging crude oil prices. While geopolitical volatility remains a key driver for short-term sentiment, the USDINR technical setup remains bullish; having breached ascending channel resistance, the pair eyes a 93.75 level with support shifting to 92.90."
 
On Wednesday, the rupee fell 49 paise to close at its previous record low of 92.89 against the US dollar. 

Meanwhile, brent crude, the global oil benchmark, was trading 0.64 per cent higher at $109.36 per barrel in futures trade.

On the stock market front, Sensex closed 325 points higher at 74,532, while Nifty surged 112 points to 23,114. Foreign institutional investors sold equities worth Rs 7,558.19 crore on a net basis on Thursday, according to exchange data.