Experts seek govt action to revive weak rupee in forex market
The weakness in the rupee is likely to continue due to strengthening of the dollar against major currencies such as the euro. According to market experts, the government should take some immediate steps to control the fall of rupee against the dollar.
Triggered by high current account and fiscal deficits, slowdown in foreign fund inflows and the European crisis, the rupee has declined over 20 per cent in the one year to 17 May 2012. It tanked to its all-time low of 54.39 against the dollar on the day. The weakness in the rupee is likely to continue due to strengthening of the dollar against major currencies such as the euro.
According to market experts, the government should take some immediate steps to control the fall of rupee against the dollar. The Reserve Bank of India (RBI) has sold around $20 billion in the spot market between September 2011 and March 2012. However, all the efforts made by the central bank have gone in vain, with rupee weakening continuously.
"Despite the RBIs intervention, the rupee has reached its all-time low. However, one should remember that this trend is not restricted to the Indian rupee; the problem exists across all Asian currencies, making it a more difficult situation," says DK Aggarwal, chairman and managing director, SMC Investments and Advisors.
Analysts are not very optimistic about the outlook for the rupee. "We might see some immediate correction in the rupee towards 54, but it may breach the 55 level in the next three months. The currency is likely to stay in the range of 52-55 during the period," says Abhishek Goenka, founder and chief executive officer of India Forex Advisors.
The devaluation of the rupee can hurt the domestic stock market. On a year-to-date basis till 15 May 2012, the Sensex has gained 5.22 per cent to reach 16,328 points.
"The falling rupee can raise fears of more foreign investors cutting exposure to Indian stocks," says Sanjeev Zarbade, vice president, private client group research, Kotak Securities.
Foreign institutional investors made a net investment of Rs 42,842 crore during January-April 2012, according to data released by the markets regulator Securities and Exchange Board of India.
Global markets are also under pressure on rising concern over the euro debt crisis as political instability in Greece is a cause for concern.
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According to market experts, the government should take some immediate steps to control the fall of rupee against the dollar. The Reserve Bank of India (RBI) has sold around $20 billion in the spot market between September 2011 and March 2012. However, all the efforts made by the central bank have gone in vain, with rupee weakening continuously.
"Despite the RBIs intervention, the rupee has reached its all-time low. However, one should remember that this trend is not restricted to the Indian rupee; the problem exists across all Asian currencies, making it a more difficult situation," says DK Aggarwal, chairman and managing director, SMC Investments and Advisors.
Analysts are not very optimistic about the outlook for the rupee. "We might see some immediate correction in the rupee towards 54, but it may breach the 55 level in the next three months. The currency is likely to stay in the range of 52-55 during the period," says Abhishek Goenka, founder and chief executive officer of India Forex Advisors.
The devaluation of the rupee can hurt the domestic stock market. On a year-to-date basis till 15 May 2012, the Sensex has gained 5.22 per cent to reach 16,328 points.
"The falling rupee can raise fears of more foreign investors cutting exposure to Indian stocks," says Sanjeev Zarbade, vice president, private client group research, Kotak Securities.
Global markets are also under pressure on rising concern over the euro debt crisis as political instability in Greece is a cause for concern.
