MUMBAI: The benchmark indices continued their downward spiral on Wednesday, while rupee touched another record low, sparking fears of an impending rate hike next month.
While Sensex fell 0.37 per cent to 38,018, posting its longest losing streak in nearly six months, the Nifty 50 index erased 43 points to settle at 11,477. Rupee weakened to an all-time low of 71.96 against the US dollar, while the 10-year bond yield stood at 8.091 per cent, from its previous close of 8.063 per cent.
The rupee, which so far lost 11 per cent this year, was within a striking distance of 72, and closed at 71.76, down 0.3 per cent compared to its previous close. The steady slide forced the RBI’s invisible hand, intervening mildly to withstanding the rising dollar strength. RBI is believed to have sold dollars at 71.80 in local spot forex market.
As per its own estimate given in April, a 5 per cent rupee depreciation could lead to a 20 bps increase in inflation. As it is, speculation of a policy rate hike next month is gaining momentum, thanks to falling rupee, climbing crude prices and hardening bond yields for eight consecutive sessions.
Foreign investors have sold $488.60 million and $5.75 billion in equity and debt markets respectively, as per provisional data. Meanwhile, 13 out of the 19 sector gauges compiled by BSE ended lower, led by telecom.