Rupee falls 5 paise to close at all-time low of 83.71 against US dollar post-budget.
The rupee declined by 5 paise to a provisional all-time low of 83.71 against the US dollar on Tuesday, impacted by the government's increased capital gains tax rates in the FY25 Budget.
The rupee fell by 5 paise to a provisional all-time low of 83.71 against the US dollar on Tuesday, following the government's announcement of increased tax rates on capital gains in the FY25 Budget. Additionally, a weak US dollar and declining crude oil prices contributed to the pressure on the domestic currency, according to forex traders.
In the interbank foreign exchange market, the rupee opened at 83.64, reached an intraday high of 83.61, and then hit an all-time intraday low of 83.71 against the dollar during the trading session. It eventually closed at a provisional all-time low of 83.71, down 5 paise from its previous close.
On Monday, the rupee traded within a narrow range and settled 4 paise higher at 83.66 against the US dollar. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted, "The Indian rupee fell to a new low of 83.72 and closed at a new record daily low of 83.68. Continued dollar buying, following the increase in LTCG and STCG rates and the removal of indexation benefits, has made the rupee vulnerable to reaching 84 soon, as the RBI absorbs the US dollar supply."
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, rose by 0.03 percent to 104.34. Brent crude futures, the global oil benchmark, were up by 0.24 percent, trading at USD 82.60 per barrel.
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, commented that the rupee touched a record low of 83.72 after Finance Minister Nirmala Sitharaman announced higher capital gains tax rates, leading to a decline in domestic equity markets. "The rupee opened higher today on a weak US dollar and declining crude oil prices. We expect the rupee to trade with a slight negative bias due to weakness in domestic markets, although the fall in crude oil prices and a weak US dollar may support the rupee at lower levels. Any RBI intervention may also support the rupee. Traders will also be watching US existing home sales and Richmond manufacturing index data. The USD/INR spot price is expected to trade in a range of Rs 83.40 to Rs 84," Choudhary said.
In the domestic equity market, the BSE Sensex fell by 73.04 points or 0.09 percent to close at 80,429.04 points, and the Nifty dropped by 30.20 points or 0.12 percent to 24,479.05 points.
The government proposed to rationalize the capital gains tax rate and holding period for various assets, including securities and immovable properties, in the 2024-25 Budget. Listed financial assets must be held for more than a year, while unlisted financial assets and all non-financial assets must be held for at least two years to qualify for long-term capital gains tax.
Under the proposed changes in the Budget, the short-term capital gains tax (STCG) on listed equity, equity-oriented mutual funds, and units of business trusts will increase from 15 percent to 20 percent. According to exchange data, Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Monday, purchasing shares worth Rs 3,444.06 crore.
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