New Delhi: The Indian rupee today, March 7, hit a lifetime low in early trade today as a sharp surge in global crude oil prices threatened to push up imported inflation and widen the country’s trade and current account deficits.
The partially convertible rupee was trading at 76.92/93 per dollar, after touching 76.96, its weakest level ever. It had closed at 76.16 on Friday. The benchmark 10-year bond yield was trading at 6.86%, up 5 basis points on the day.
India is the world’s third-largest importer of crude oil, and rising prices also hurts the rupee. Oil prices soared more than 6%, touching their highest since 2008 on Monday after the United States and European allies mull a Russian oil import ban while delays in the potential return of Iranian crude to global markets fuelled tight supply fears.
Indian shares tumbled over 2% on Monday, with investors dumping risky assets as oil prices soared after the United States and European allies were said to be mulling a Russian oil import ban.
The blue-chip NSE Nifty 50 index was down 2.39% at 15,857 by 0349 GMT and the S&P BSE Sensex dropped 2.52% to 52,963.78. Both the indexes extended losses to a fourth straight session. Last week, they also posted their fourth consecutive weekly loss. The Nifty’s bank index, financial services index, private sector bank index, auto index and IT index were among the top losers, dropping between 2% and 4%.
“The volatility in rupee is likely to remain high. The local equities are down by more than 2% as global sell-off led to an FII’s withdrawal of more than Rs. 16,800 crores worth of stocks so far in March. The banker’s bank- RBI acts as a lender of the last resort and their intervention could only turn out to be a “Doobte ko Tinke ka Sahara”. Overall, Tsunami has already hit the shore and five major factors, Oil+ sell-off in equities+ geopolitical tension+ stronger dollar+ state election results could lead to the unfolding of big waves in the Rupee,” said CR Forex advisors in a note.
“The extraordinary uncertainty triggered by the war has pushed commodity markets into turmoil. Crude at $128 is a big shock. This can impact global growth and aggravate inflationary pressures. In India, growth will be lower and inflation higher than projected for FY 23,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.