Mumbai: The Indian rupee slid to near a record low and equities approached a bear market as continued worries over the economic impact from the coronavirus sparked a broad selloff in risk assets globally.
The rupee weakened as much as 1 per cent to 74.3387 per dollar on Thursday to near its record low of 74.4825, a level last seen in October 2018. The S&P BSE Sensex gauge of equities slid as much as 5.4 per cent to the lowest level in 16 months.
The rupee is Asia’s worst-performing currency this month and stocks are down almost 20 per cent from the January peak despite the slump in crude oil prices as the seizure of Yes Bank Ltd. by the central bank added to fears about the spread of the virus cases in the country. The government late Wednesday suspended most visas in a bid to contain the epidemic as the World Health Organization declared the outbreak a pandemic.
“The way global risk-off is going, I expect the weakening pressure to intensify further,” said Prakash Sakpal, Asia economist at ING Groep. “This and other domestic economic negatives, more importantly increasingly weak financial system have been outweighing the positive of crashing oil price.”
Foreign investors head out
Foreigners have pulled $2.1 billion from Indian stocks this month, the most since August. They unloaded 70.9 billion rupees ($956 million) of sovereign debt on Wednesday.
“India is tracking developed markets, and we are heading for the same amount of correction due to outflows from both international and domestic investors,” said Ashish Chaturmohta, head of technical and derivatives strategy at Sanctum Wealth Management Pvt..
Oil’s silver lining
Traders have been citing attempts by the Reserve Bank of India to smoothen the rupee’s slide in the past few sessions. The central bank is sitting on record forex reserves of $482 billion, thanks to its continued purchases in the currency markets over the past few years.
The plunge in the global crude oil price remains a bright spot for the nation’s struggling economy. The price of crude crashed more than 30 per cent on Monday after the disintegration of the OPEC+ alliance triggered an all-out price war between Saudi Arabia and Russia.
“The rupee may not fall as much as other asset classes thanks to the oil price crash, which could save $35-$40 billion per annum for India,” said Chokkalingam G, head of investment advisory Equinomics Research & Advisory Pvt.. “It’s a bonanza for the Indian economy.”