Golden months for the rupee seem to have gone. Towards the end of the last week, the domestic currency shivered strongly amidst FII selling. The positives like an energetic government and the declining crude prices seem to be slowly fading away. The FIIs are now more pessimistic.
MAT hammer from the tax department has produced some sort of an avalanche and it turns out to be the immediate negative factor. Finance Minister’s assurance on the issue has saved a second day fall for the rupee.
The year 2014, was such a beautiful one for the domestic currency that it remained a star performer with steady appreciation among the EME currencies.
Now, the FIIs are making profit booking- a practice of selling shares to consolidate their gain in the context of some future set back. Only serious reform measures with strong mind like that on the land bill can make investors continuously hopeful. Unless this happen or any delay, will drive the rupee to new lows.
Indications are that the downward pressure on the domestic currency may continue in the coming weeks and hence it may face testing time again.
Only relief for rupee is that the US Fed has postponed the monetary tightening despite repeated effort to launch it.
Everybody knows that the liquidity in the foreign exchange market and the value of rupee depends upon the position of the FIIs. Throughout the last year, the FIIs have depicted strong belief on the Indian economy, despite weak macro data.