The indian rupee hit a record low today, sending indian economists into a panic. On october 11, the rupee crossed the 84 level against the US dollar. Today, the indian Rupee fell by 12 paise to hit a new low of 84.0975 in a single day. The main reasons for this decline are two: outflow of funds by foreign investors and rising crude oil prices amid global uncertainty. Demand for the dollar has increased in indian stock markets as foreign portfolio investors (FPIs) have been selling excess holdings in the stock market. As a result, the rupee has weakened. When foreign investors invest in india they bring in dollars. When they withdraw their investment, they take dollars out of the indian market. It is this exodus that increases the demand for dollars in india and raises its value over the rupee. Foreign investors have sold shares worth Rs 55,000 crore in the indian stock market in the last nine days alone, selling almost $1 billion worth of shares almost daily and recouping dollar investments. This trend is expected to continue, pushing the rupee further towards 84.25 in the short term.
The ongoing Iran-Israel-Lebanon conflict is pushing up crude oil prices and weakening the rupee. Brent crude oil prices have risen from around $69 on september 30 to $78.92 today. China's interest rate cut of 10 basis points and cash reserve ratio cut of 50 basis points have changed the course of the investment market. In particular, China's economic stimulus package worth $140 billion has become an important reason for foreign investors to move into Chinese stock markets. china may unveil its updated 2 trillion yuan ($283 billion) new fiscal guarantee program on saturday to boost its economy, market analysts say. Due to this, there is not only a high possibility of additional investments leaving the indian stock market but also a high chance of the stock market falling.
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