Rupee drops 40 paise; reaches worrying levels again

Business

oi-Sneha

By Sneha B K

Published: Wednesday, May 9, 2012, 13:02 [IST]

The rupee once again dropped below the 53.50 levels, after a brief respite on Monday following the General Anti Avoidance Rules (GAAR). The rupee dropped almost 40 paise and was seen trading at 53.53 against the dollar.

Weak equities also contributed to the fall of the rupee. The rupee has been dropping on account of weak fundamentals of the Indian economy. In fact, the widening current account deficit has seen the rupee reach worrying levels. The Current Account Deficit is expected to reach 4% of GDP for 2012.

Foreign institutions too have been constant sellers in equities, contributing to dollar outflows. On Tuesday they net sold in equities worth Rs 592 crores.

Compounding the problems of the rupee is the large dollar demand from foreign funds. Marketmen beleive that the rupee could drift lower, unless there is regular intervention from the Reserve Bank of India.

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