Rupee Hits Record Low Post Capital Gains Tax Rate Hike

The Indian rupee declined 3 paise to 83.69 against the US dollar, hitting a record low following the government's hike in capital gains tax rates in the FY25 Budget. Weakness in the US dollar and crude oil prices contributed to the rupee's fall. Forex traders expect the rupee to remain under pressure.

The Indian rupee declined 3 paise to 83.69 against the US dollar on Tuesday after the government raised tax rates on capital gains in the FY25 Budget.

Besides, a weak tone in the US dollar and weakness in crude oil prices also put pressure on the domestic unit, forex traders said. At the interbank foreign exchange market, the local unit opened at 83.64 and touched an intraday high of 83.61 before hitting an all-time intraday low of 83.72 against the dollar during the trading session. It finally settled at 83.69 against the American currency, registering a fall of 3 paise from its previous close.

On Monday, the rupee consolidated in a narrow range to settle 4 paise higher at 83.66 against the American currency.

''Dollar buying continued to be the theme after the increase in LTCG and STCG and the removal of indexation benefits. The rupee looks vulnerable to 84 soon as the RBI absorbs the US dollar supply,'' said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

Meanwhile, the dollar index, measuring the greenback's strength against a basket of six currencies, was trading higher by 0.03 per cent at 104.34. Brent crude futures, the global oil benchmark, were trading higher by 0.24 per cent at USD 82.60 per barrel.

The rupee touched a record low of 83.72 following Finance Minister Nirmala Sitharaman's decision to raise tax rates on capital gains, causing a decline in the domestic equity markets. The rupee opened higher earlier on a weak tone in the US Dollar and weakness in crude oil prices.

''We expect the rupee to trade with a slight negative bias on the weakness in the domestic markets. However, the decline in crude oil prices and a weak US Dollar may support the rupee at lower levels. Any intervention by the RBI may also support the rupee. Traders may also take cues from existing home sales and Richmond manufacturing index data from the US. The USD/INR spot price is expected to trade in a range of Rs 83.40 to Rs 84,'' said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.

In the domestic equity market, the 30-share BSE Sensex fell 73.04 points or 0.09 per cent to settle at 80,429.04 points and Nifty dropped 30.20 points or 0.12 per cent to 24,479.05 points.