Rupee at All-Time Low Against Dollar Amid Investor Concerns

The Indian rupee plummeted to a record low of 83.71 against the US dollar, impacted by an increased capital gains tax in the FY25 Budget and removal of indexation benefits. Foreign investors sold stocks, causing further depreciation. Capital markets witnessed significant sell-offs, adding to the rupee's decline.

The Indian rupee depreciated by 2 paise, hitting an all-time closing low of 83.71 against the US dollar on Wednesday. The decline was driven by the strength of the dollar against major global currencies and a weakened appetite for riskier assets among investors.

Forex traders identified the increase in capital gains tax and the removal of indexation benefits announced in the FY25 Budget on Tuesday as the primary reasons for the surge in dollar buying, leading to significant stock sell-offs by foreign institutional investors (FIIs). According to exchange data, FIIs sold shares worth Rs 5,130.90 crore in capital markets on Wednesday, adding to the rupee's depreciation.

The local unit began trading at 83.69 and fluctuated between an intra-day high of 83.68 and a low of 83.72 before settling at its historical low. The previous day saw a similar decline due to changes in capital gains tax. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, noted that sustained dollar buying contributed to the rupee's pressure as the government seems interested in attracting inflows to bolster central bank reserves.