June 25, 2012 / 20:04 IST
The rupee slumped to fresh record low of 57.92 after RBI measures to stem the currency slide failed to enthuse investors but it managed to recover some ground and closed 14 paise higher at 57.01 in a day of huge volatility.
At the Forex market, the domestic unit opened strong at 56.73 on initial rally in local stocks amid expectations of aggressive measures from the government today to arrest the rupee's down slide, which has fallen over 26% in the last one year.
The mood improved after Moody's today retained country's credit rating outlook at "stable". The rupee even touched a high of 56.38, up 77 paise or 1.35%. But RBI measures came as a cropper. It announced a hike in FII limit in government bonds to USD 20 billion, while allowing up to USD 10 bilion from overseas borrowings by India Inc for financing new projects and refinancing of rupee loans.
The currency soon started falling and touched a fresh low of 57.92 by late trade but recouped losses to end at 57.01, up 14 paise or 0.24% against the previous close of 57.15. It was a day of huge fluctuations for the local currency, swinging between 57.92 and 56.38, a difference of 154 paise, one of the largest in recent history. However, the meagre rise in rupee today against the dollar snapped a losing string of five straight losses.
"Initially, rupee appreciated on the expectations that some big-bang measures would come. However, as the announcements disappointed the market, rupee slipped. The steps will have a medium-term impact," said Moses Harding, Head - ALCO and Economic and Market Research, IndusInd Bank. Hemal Doshi, Currency Strategist, Geojit Comtrade said without any further measures, rupee touching 58 level is a real possibility.
Meanwhile, the Indian stock market benchmark Sensex, which was up today by over 158 points in early trade, closed down by over 90 points or 0.53% on late selling.
KPMG India Parter Rohit Bammi said that the RBI steps would have a limited impact on the spot rupee level.
"While the increase in the government bonds limit is certainly beneficial for the bond markets in the medium term, the ECB announcements are unlikely to have any meaningful impact on the rupee level in the near-term," Bammi said.
On the whole, if these announcements represent the sum total of all government policy action, then investors have not been appropriately addressed, he said in a statement. RBI today relaxed investment norms for qualified foreign investors and allowed them to invest in the mutual fund schemes that hold at least 25 per cent of their assets either in debt or equity or both in the infrastructure sector.
However, it said that this relaxation would be subject to review
