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Heavy FII outflows from the stock market have been weighing on the rupee
The Indian rupee on Monday tumbled to a new all-time low of Rs63.22 against the US dollar due to heavy outflows by foreign institutional investors (FIIs) and weakness in the stock markets. However, it recovered and ended at 63.13 as against last week's close of 61.66. Last week, on 16th August, the domestic currency hit its all time low at 62.03 against the dollar.
According to dealers, the heavy FII outflows from the domestic equity market have been weighing on the currency. The dollar saw high demand from importers as the currency market remained closed over the weekend.
"Rupee is amongst the worst performing Asian currency and FII's are less optimistic on the outlook for India, which has been suffering from capital outflows because the barriers to investment are too high. There were investments of around $15.35 billion in equity markets in the first five months of this year, whereas they have withdrawn investment worth $2.6 billion from June 2013 till date. Its a vicious cycle, wherein rupee weakness is leading to a fall in equity markets as FIIs are withdrawing their money to protect their capital and this in turn is leading to further depreciation of the domestic currency. The bond yields have crossed an all-important 9% mark and India VIX has surged to the levels of 26, first time after November 2011," said Sugandha Sachdeva, assistant vice-president & in charge-metals, energy and currency research, Religare Securities Ltd.
Market players say the continuous slide in the rupee can only be halted if the government hikes the import duty on non-essential goods such as mobile phones and electronic items.
The rupee has hit new lows thrice in the past two weeks despite a series of measures announced by the government to curb current account deficit and revive economic growth.
The benchmark BSE Sensex opened Monday 0.39% lower than the previous week's close, due to concerns over US monetary stimulus withdrawal, which has put pressure on the domestic unit.
Stories of Price Manipulation
Omni Ax’s Software (Rs2)
Omni Ax’s Software is listed on the Bombay Stock Exchange (BSE). Omni’s annual report for 2012 claims that it is engaged in developing computer software. There is no mention of the kind of software being developed nor who its clients are. Revenues for FY11-12 were reported as Rs56 lakh and expenses for the purchase of software are as high as Rs55.90 lakh, i.e., 93% of the total revenues. A similar figure was reported for the previous financial year. Are these numbers genuine? After all, for three consecutive quarters, ended December 2011, March 2012 and June 2012, Omni reported negligible sales. It was suspended by the BSE from 19 March 2013 to 28 March 2013 for not complying with the listing agreement. Omni has even invested Rs4.85 crore in two unlisted companies. The share price of the company shot up by as much as 175% in two months—from Rs0.71 on 7 June 2013 to Rs1.95 on 5th August. The stock price of another company, Eduexel Infotainment Ltd, with the same registered address and common director—Rajendra Jain—has more than doubled—from Rs4.66 in mid-April 2013 to Rs9.94 at the beginning of August 2013. Any expectations from the BSE or SEBI?