The Indian market also showed the impact of 25 per cent import duty on Canada and Mexico and the US announcement of imposing additional 10 per cent duty on goods imported from China. The Indian market today recorded a decline in rupee and stock market.
The rupee fell beyond 87 per dollar. In view of the huge uproar in the money market, the Reserve Bank of India (RBI) intervened, which made up the rupee for some loss but closed at 87.19 against the dollar at the end of the business at 87.19.
The benchmark Sensex and Nifty remained at about half a percent loss. However, compared to global markets, the decline in the domestic stock market was relatively low. The major global markets have declined by about 2 per cent. The performance of Taiwan, Indonesia, Thailand and South Korea was worse due to fear of starting the trade war due to the US fee. The dollar index rose 1.35 per cent to 109.83.
During the trading, Sensx and Nifty had come down 1–1 percent. The Sensex fell 319 points to close at 77,187 after touching a low of 76,756. The Nifty closed at 23,361 with a loss of 121 points. The Nifty Smallcap declined by 2.1 percent and midcap by 0.93 percent.
The rupee has come to a biggest decline in one day after January 13 against the dollar. So far in the current financial year, the rupee has turned 4.34 percent soft. This year it has weakened 1.81 percent. In just 15 trading sessions, the rupee fell from 86 to 87. There were 46 trading sessions to fall from 85 to 86 per dollar. Due to not increasing the capital expenditure in the budget, the shares of companies connected with rail and road infrastructure declined more. Larsen & Toubro fell 4.6 per cent and it has lost 7 per cent in two days.
The shares of consumer goods companies were also seen softening and Nifty FMCG closed down 1.7 per cent. The announcement of the trump administration imposing an additional import duty by the Trump administration on China, the world’s largest metal producing country, also softened the metal shares.
Market partners said that the RBI’s Monetary Policy Committee has also increased the pressure on the rupee with the expectation of cutting the repo rate. If the repo rate is cut on Friday, the rupee can fall by 87.50 per dollar.
The treasury head of a government bank said, “The increase in the fee by Trump has softened the rupee and there is also pressure on him with the hope of cutting the repo rate. This is the reason why the rupee is weakening against the dollar.
He said, ‘In the budget, measures to promote consumption demand have been indicated indirectly. In view of the sharp decline of the rupee, the RBI sold the dollar in the dollar market, which led to the rupee below 87.25 per dollar. I think it would have been sold for $ 2 to 3 billion. If the repo rate is cut, the rupee can reach 87.50 per dollar.
It is expected that the Monetary Policy Committee can cut the repo rate by 25 basis points after about 5 years.