Rupee falls 5 paise to close at all-time low of 83.71 against US dollar post-budget

The rupee declined 5 paise to hit an all-time low of 83.71 (provisional) against the US dollar on Tuesday after the government raised tax rates on capital gains in the FY25 Budget.

Besides, a weak tone in the US dollar and weakness in crude oil prices also put pressure on the domestic unit, forex traders said.

At the interbank foreign exchange market, the local unit opened at 83.64 and touched an intraday high of 83.61 and touched an all-time intraday low of 83.71 against the dollar during the trading session.

It finally settled at an all-time low of 83.71 (provisional) against the American currency, registering a fall of 5 paise from its previous close.

On Monday, the rupee consolidated in a narrow range to settle 4 paise higher at 83.66 against the American currency.

"Indian rupee fell to a new low of 83.72 and also closed on a new record daily of 83.68. Dollar buying continued to be the theme after the increase in LTCG and STCG and then the removal of indexation benefits. The rupee looks vulnerable to 84 soon as the RBI absorbs the US dollar supply," Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP, said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.03 per cent at 104.34.

Brent crude futures, the global oil benchmark, were trading higher by 0.24 per cent at USD 82.60 per barrel.

The rupee touched a record low of 83.72 after Finance Minister Nirmala Sitharaman raised tax rates on capital gains, which led to a decline in the domestic equity markets.

The rupee opened higher earlier today on a weak tone in the US Dollar and weakness in crude oil prices, Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.

"We expect the rupee to trade with a slight negative bias on weakness in the domestic markets. However, the decline in crude oil prices and weak US Dollar may support the rupee at lower levels.

"Any intervention by the RBI may also support the rupee. Traders may also take cues from existing home sales and Richmond manufacturing index data from the US. 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 30-share BSE Sensex fell 73.04 points or 0.09 per cent to settle at 80,429.04 points and Nifty dropped 30.20 points or 0.12 per cent to 24,479.05 points.

The government on Tuesday proposed to rationalise the capital gains tax rate and holding period of various assets, including securities and immovable properties, in the 2024-25 Budget.

Listed financial assets will have to be held for more than 1 year, while unlisted financial assets and all non-financial assets for at least 2 years to qualify for long-term capital gains tax.

As per the changes proposed in the Budget, short-term capital gains tax (STCG) on listed equity, equity-oriented mutual funds and units of a business trust has been increased to 20 per cent from 15 per cent.

Long Term Capital Gains Tax (LTCG) on these securities is proposed to be hiked to 12.5 per cent from 10 per cent. Long-term capital gains up to Rs 1.25 lakh annually will be exempt from tax, up from Rs 1 lakh currently.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Monday as they purchased shares worth Rs 3,444.06 crore, according to exchange data.