The rupee closed weaker against the US dollar on Monday, as local equities declined for a fourth straight session amid worries about slowing domestic growth, sticky inflation, widening twin deficits and policy paralysis.
The rupee closed at 55.31 per dollar after being as low as 55.38 and as high as 54.77. It had opened at 54.90 versus the previous close of 55.14.
The Indian equity markets ended with losses for a fourth straight trading session on Monday, kicking off the new trading week on a negative note. Markets extended their losing streak on account of sustained selling pressure in the second half of the day.
The Sensex ended at 17,103, losing by 110 points or 0.64%. It had earlier touched a day’s high of 17,282 and a day’s low of 17,079. It opened at 17,241.
The NSE Nifty settled at 5197, down 30 points or 0.57% from the previous close. It touched a day’s low of 5,190 and a day’s high of 5,247.
Indian markets did accelerate briefly after inflation decreased in June from the previous month, raising expectations of monetary easing by the Reserve Bank of India (RBI) on July 31.
However, concerns over a high fiscal deficit and suppressed inflation in regulated fuel prices may still make the RBI maintain a status quo on monetary policy on July 31.
The onus is on the Central Government to restore investor confidence and shore up economic growth.
With the presidential getting completed this week, there is hope that Dr. Manmohan Singh & Co. will be able to push through at least a couple of key reforms soon. The markets will be highly disappointed if the Centre misses the bus yet again on reforms
The undercurrent was also affected by mounting concerns over scanty rainfall across several parts of the country and its impact on the economy going ahead.
The southwest monsoon hit Kerala on June 5 but its progress across the country has been delayed and sluggish, adversely impacting sowing of crops such as paddy, coarse cereals, oilseeds and pulses.
Monsoon rains in July may be less than forecast, L.S. Rathore, the Director General of the India Meteorological Department (IMD), was quoted as saying today. "There may be some deficiency in rains in July and September,” Rathore said.
The Chinese shares tumbled today after Chinese Prime Minister Wen Jiabao said that economic growth has not gained momentum and that the government will step up policy fine-tuning.
Jiabao said over the weekend that China’s economic rebound isn’t yet stable and hardship may continue for a period of time, according to a state-media report.
In the international markets, the euro fell to a six-week low against the yen on mounting evidence that the euro area is moving toward its second recession in three years.
The 17-nation currency dropped below $1.22 for a third day versus the dollar after German Chancellor Angela Merkel said she hasn’t softened her stance on measures to stem contagion.
The Swedish krona declined the most among the 16 major currencies.
Federal Reserve Chairman Ben S. Bernanke will update the US congress about the state of the economy this week. Markets around the world will look for hints about a possible launch of QE3.
Wall Street will also react to US retail sales, industrial production and a whole host of corporate earnings.
The eurozone will continue to be on investors' radar amid ongoing efforts to rein in the seemingly never-ending credit crisis.