Record Street: Rupee nears 88/$, gold Rs 88k

MUMBAI/HYDERABAD: Investors across geographies and assets were jittery on Monday as US President Donald Trump continued to announce new measures, mostly related to trade tariffs. During the day, the rupee weakened to a new record low at close to 88-to-a-dollar mark but closed substantially off that mark, at 87.48, while gold prices inched closer to the Rs 88,000-per-10-gram mark, a record high level. On Dalal Street, across-the-board selling pulled the sensex down by 548 points or 0.7% to 77,312.

However, small and midcap stocks were affected more than blue chips by the selloff led by foreign funds. BSE's midcap index was down 2.1% while smallcap was down 2.3%.

On Monday, foreign portfolio investors were net sellers at Rs 2,464 crore, BSE data showed. So far this year, FPIs have net withdrawn nearly Rs 90,000 crore from the stock market alone, data from NSDL and BSE showed.

This outflow of foreign funds also had a negative impact on the rupee-dollar exchange rate, which is hitting new record low levels on a regular basis.

According to Jateen Trivedi of LKP Securities, the rupee's weakness was mainly due to the recent continued outflow of foreign funds post-Budget and RBI policy as neither of the events provided any substantial reforms or structural shifts beyond tax sops for retail investors and a minor cut in interest rate by the central bank. "With ongoing capital outflows, global trade tensions, and a strong dollar, rupee volatility is expected to persist in the 87.25 - 88 range."

In the bullion market, propelled by the Trump effect, gold breached the $2,900/ounce mark for the first time ever to hit an intraday high of $2,911 in international spot markets late on Monday. This rally sent prices in local spot markets soaring by over Rs 1,000 in a single day to over Rs 87,250. On MCX, the futures prices for April delivery had hit an all-time high at Rs 85,835.

HDFC Securities attributed the latest high to increased fund flow towards gold as a safe haven asset in response to Trump's latest decision to impose 25% tariffs on all steel and aluminium imports to the US.

In Aug 2020, when gold was at its then peak of $2,019, rupee was pegged at around 75 to the dollar. Indian Bullion & Jewellers' Association's Surendra Mehta said the sudden surge in prices post Trump's coming to power has driven customers out of the market. "It's a one-sided sentiment. There are no customers in the market. Walk-ins have plunged 80%. It's a big problem as even gold leasing rates are going up," Mehta said.