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Indian rupee decline worries FM

Mumbai, May 25 (): Indian rupee touching a six month low of 55.46 has got the finance ministry and Sebi the stock market regulator into a huddle. U K Sinha Chairman Sebi held a meeting in the North Block of Secretariat. To keep the foreign funds inflow and check to see if outflows don’t affect the rupee, Finance ministry has allowed FII to use the call and put option by which they can have right to buy and sell but with no obligation to do within a specified time limit. This option is given in only key sectors.

The dollar strengthened against most currencies as the economy is said to be recovering. This has put rupee slide down to the 55 mark and if it breaches the 56 mark then it would rise further to 57 says analysts. As imports are pegged at dollar price the import of crude oil and other commodities would rise. The India trade deficit with other countries is already a big headache.

For an oil company in India if the rupee decline of one against dollar then the cost of LPG increases by Rs 15 and petrol products by 83 piece. With Rs1 decline the oil companies had to shell out Rs 8,500 crore extra every year. Fortunately the crude oil prices are low. Steady dollar demand with the greenback getting stronger compared to the yen and euro, rupee lost 37 paise last week at the Foreign exchange market of inters banks. Low opening in stock markets of BSE sensex with a decline of 84 points last week trading and importers buying dollar as well as banks saw rupee decline.

Sebi role becomes important since the outflow of FII investors will have to be in check. If heavy outflows happen then rupee will get smashed. If the stock markets are not good then the next option is to buy dollars. Pakistan rupee which had gained last week slipped against dollar as it is time to make payments to the IMF.