Rupee hits all-time low of 84.40 against US dollar on weak investor sentiment

The Indian rupee continued its slide, hitting a new record low of 84.40 against the US dollar in early trade on Tuesday. This marks a depreciation of 2 paise from the previous close of 84.38, as persistent foreign fund outflows and a strong US dollar weighed on investor confidence.

The rupee began trading at 84.39 at the interbank forex market before dipping further to its current all-time low. Market analysts project that the currency could trade in a range between 83.80 and 84.50 in the medium term. Despite the downward trend, the Reserve Bank of India (RBI) is expected to intervene to prevent significant depreciation, leveraging its ample foreign exchange reserves for support.

Market performance and global factors

The US dollar index, which measures the strength of the dollar against six major currencies, was up by 0.09 percent at 105.63, reflecting the ongoing resilience of the American currency. Additionally, Brent crude oil prices saw a slight decline of 0.25 percent, trading at USD 71.65 per barrel in futures.

On the domestic front, Indian equity markets displayed mixed performance. The Sensex rose marginally by 77.35 points to 79,573.50, while the Nifty index climbed 19.90 points, reaching 24,161.20.

Foreign fund outflows continue

Foreign Institutional Investors (FIIs) remained net sellers, offloading shares worth Rs 2,306.88 crore on Monday. The recent sell-off by FIIs follows a broader trend of outflows seen throughout November, driven by concerns over high stock valuations and weaker-than-expected corporate earnings for Q2.

Market implications

The steady depreciation of the rupee amid ongoing foreign outflows signals caution among investors. However, the RBI's proactive stance and strong forex reserves could provide a cushion against further sharp declines. The upcoming economic data releases and global market trends will be closely monitored for cues on the rupee's trajectory.