Rupee drops 5 paise to 74.83 against dollar on weak IIP data

Forex traders said the rupee traded in a narrow range as muted domestic equities and weak industrial output data weighed on investor sentiment while sustained foreign fund inflows supported the unit. The NSE Nifty slipped 14.10 points or 0.12 per cent to close at 11,308.40. Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,013.66 crore on Tuesday, according to provisional exchange data.

The rupee declined by 5 paise to close at 74.83 against the US dollar on Wednesday due to losses in equity markets and weak industrial production data. Forex traders said the rupee traded in a narrow range as muted domestic equities and weak industrial output data weighed on investor sentiment while sustained foreign fund inflows supported the unit. The local unit opened flat at 74.78 at the interbank forex market but later lost ground to settle at 74.83 against the US dollar, down 5 paise over its last close of 74.78. During the session, the domestic unit witnessed an intra-day high of 74.77 and a low of 74.93 against the greenback.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.03 percent to 93.59. India's industrial production declined 16.6 percent in June on account of disruption in normal business activity following the outbreak of coronavirus pandemic.

The decline in factory output was widespread across the sectors, including manufacturing, mining, power generation, capital goods, and consumer durables, according to the data released by the Ministry of Statistics and Programme Implementation. The BSE Sensex snapped its four-session winning run to close marginally lower due to profit booking. Sensex ended down 37.38 points or 0.10 percent at 38,369.63. The NSE Nifty slipped 14.10 points or 0.12 percent to close at 11,308.40.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,013.66 crore on Tuesday, according to provisional exchange data. Brent crude futures, the global oil benchmark, rose 0.99 percent to USD 44.94 per barrel.

Meanwhile, the number of cases around the world linked to COVID-19 has crossed 2.02 crore, and in India, the number of infections topped the 23-lakh mark. "Indian rupee erased Tuesday's gain following recovery in dollar and US treasuries. Risk averse sentiment seen on uncertainty over US stimulus," said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities. According to Sriram Iyer, Senior Research Analyst, Reliance Securities, the Indian Rupee depreciated marginally probably due to RBIintervention in the market. Markets speculated that RBI intervened in the markets to counter the large flows which are expected to come into the markets from ICICI Bank's QIP.

Iyer further said COVID-19 vaccine hopes and fresh stimulus from the US could improve risk appetite, however, simmering tensions between the US and China could limit the appreciation bias in the market. "Market participants will be keeping an eye on the inflation number and expectation is that price growth could be higher in July compared to the previous month," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 74.8436 and for rupee/euro at 87.8050. The reference rate for rupee/British pound was fixed at 97.7832 and for rupee/100 Japanese yen at 70.49.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)