Sensex falls 200 points, rupee nears 63/dollar

January 30, 2014 11:30

The BSE Sensex fell nearly 200 points to 20,448, while the Nifty shed 0.9 per cent to 6,058 tracking global selloff across risk assets. The Indian rupee slipped 0.5 per cent to 62.90 per dollar before paring losses.

The trigger for Thursday's fall comes from the US, where the Federal Reserve said it will cut its monthly bond purchases starting in February by $10 billion to $65 billion.

Many global investors fear that reduced Fed bond buying will raise US interest rates and cause investors to move money out of emerging markets and into the United States for higher returns.

Indian markets are dependent on foreign institutional investors for liquidity. FIIs invested $20 billion in India last year and close to $500 million in January.

The rupee has been in a range of 62-63 over the last few months. Fundamentals supporting the rupee have improved dramatically ever since Raghuram Rajan took charge of the Reserve Bank. India's current account deficit, the single biggest factor weighing on the currency, has come down sharply, easing pressure on the rupee. The RBI also upped the repo rate earlier this week, a move that will support the rupee.

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