- Wednesday, February 26, 2025
By: Shubham Ghosh
THE Indian rupee is set to end 2021, a tumultuous year, as Asia’s worst-performing currency with foreign funds running away from the nation’s stocks.
According to a report by Bloomberg, the currency declined 2.2 per cent this quarter as global funds pulled $4.4 billion of capital out of India’s stock market, the most among the regional markets for which data is available.
Foreigners sold Indian stocks as Goldman Sachs Group Inc. and Nomura Holdings Inc. lowered their outlook for equities recently at a time when concerns over the Omicron variant of the deadly coronavirus are scaring global markets.
They cited lofty valuations while taking the step.
Bloomberg also said that factors such as record-high trade deficit and the country’s central bank’s policy divergence with the federal reserve also affected the rupee’s carry appeal negatively.
“The monetary policy divergence and widening current account gap have set depreciation in the rupee in the near term,” B Prasanna, head of global markets, sales, trading and research at ICICI Bank Ltd in Mumbai, said.
Rupee’s depreciation is a double-edged sword for the Reserve Bank of India, the report added. While a weaker currency may help exports amid a nascent economic recovery from the Covid-19 pandemic, it also raises risk of imported inflation and may make it difficult for the central bank to maintain interest rates at a record low for a long time, the report said.
