On Wednesday, the Indian rupee depreciated by 1 paisa, matching its all-time closing low of 83.70 against the US dollar. The decline was driven by a robust US dollar and weak risk appetite among investors following the recent budget announcement.
Forex traders pointed to the government’s decision to increase capital gains tax and eliminate indexation benefits in the FY25 Budget as key factors behind the heightened demand for the US dollar. This move prompted foreign investors to sell stocks, adding pressure on the rupee.
At the interbank foreign exchange market, the rupee opened at 83.69, fluctuating between an intra-day high of 83.68 and a low of 83.72. It ultimately settled at 83.70, marking a 1 paisa decline from the previous session’s close of 83.69. The rupee had already experienced a 3 paise drop on Tuesday, following the tax hikes on capital gains announced in the budget.
The government’s proposal includes reducing the long-term capital gains tax on immovable properties from 20% to 12.5%, but it also removes indexation benefits, which adjust gains for inflation. Experts have criticized this move as unfavorable for sellers. According to the Union Budget memorandum, the removal of indexation will affect the calculation of long-term capital gains for property, gold, and other unlisted assets.
The dollar index, which measures the greenback’s strength against six major currencies, was up 0.05% at 104.50. Brent crude futures, the global oil benchmark, also saw an increase, trading 0.79% higher at USD 81.65 per barrel.
In the domestic equity market, the 30-share BSE Sensex dropped 280.16 points, or 0.35%, to close at 80,148.88 points, while the Nifty fell 65.55 points, or 0.27%, to 24,413.50 points. Foreign Institutional Investors (FIIs) were net sellers on Tuesday, offloading shares worth Rs 2,975.31 crore.
Market analysts predict that the rupee will continue to face pressure in the coming days, influenced by global economic trends and domestic policy changes. The focus will remain on the government’s fiscal policies and their impact on investor sentiment and capital flows.