Rupee falls in early trade despite govt steps to check currency depreciation

The Indian rupee slipped in early morning trade today despite the government announcing steps to arrest the sliding currency this weekend. The rupee fell 67 paise to 72.52 against the dollar compared to Friday's close of 71.85 level. It went on to reach 72.64 per dollar, down 79 paise later.

On Saturday, the government announced steps to check non-essential imports and promote exports in order to arrest the decline in rupee, check the widening current account deficit and relaxing norms for raising overseas borrowing. The steps were announced after a meeting chaired by Prime Minister Narendra Modi to assess the prevailing issues in Indian economy.

Last week, the Indian currency rose over 100 paise from its all-time low of 72.91 in two sessions on reports that the government would announce steps to check the fall in currency on weekend.

"The measures which the government took over weekend will have minor impact on rupee. The measures like  making ECBs easier for manufacturing companies, exempting masala bonds from withholding tax etc will just improve the sentiment.In our view, steps are inadequate at present level and will show impact only in the medium term, not immediately. In our view, govt should take more steps to increase FDI by which India can receive more inflows of stable nature," Hem Securities said in a note. 

According to  a report by HDFC Bank, the government's rupee depreciation arresting measures announced Friday may not drive fund inflows and are a negative from a longer term perspective as they increase short-term debt, a HDFC Bank report has said.

"Considering that most of the measures aim at increasing short-term external debt or in effect worsen the risk profile of companies (by increasing un-hedged exposure), could actually be considered negative," the note released Saturday by one of the largest private sector lenders said.

Meanwhile, the Sensex fell over 350 points to 37,716 and the Nifty was trading 100 points lower at 11,415.