QBiz: Rupee Plunges to Historic Low; RBI Makes First Gold Purchase

The Indian rupee crashed to yet another historic low of 71.21, losing 21 paise at the close against the US dollar.

6 min read
A vendor holds an Indian one hundred rupee banknote at a market stall in Mumbai on 11 March  2017. 

1. Rupee Plunges to Historic Life Low of 71.21 Vs $

The Indian rupee on Monday, 3 September, crashed to yet another historic low of 71.21, losing 21 paise at the close against the US dollar as nagging concerns over rising crude oil prices and trade war tensions continued to hurt forex market sentiment.

It was a virtual collapse for the Indian unit during the late afternoon session despite a strong start as investors hit the panic button and even government’s efforts to calm investor nerves failed to yield any result.

In early trade, the rupee resumed on a firm foot at 70.80 against weekend close of 71.00 at the inter-bank foreign exchange (forex) market.

(Source: The Hindu Business Line)

2. RBI Makes First Gold Purchase In Nine Years; Buys 8.46 Tonnes In FY18

The Reserve Bank of India has bought 8.46 tonne of gold in financial year 2017-18, the first purchase of yellow metal by the apex bank in almost nine years.

RBI held 566.23 tonne of gold as on 30 June 2018,compared with 557.77 tonne as on 30 June 2017, according to the RBI's latest annual report for 2017-18. “The increase is on account of addition of 8.46 tonne of gold during the year,” the report said.

Last time the apex bank purchased gold was in November 2009, when it had bought 200 tonne of yellow metal from the International Monetary Fund.

The value of gold held as asset of Banking Department rose by 11.12 percent to Rs 69,674 crore as on 30 June 2018, from Rs 62,702 crore from the year-ago period. This increase was primarily on account of depreciation of rupee as against the dollar and the addition of 8.44 tonne of gold during the year, RBI report said.

(Source: Bloomerberg Quint)

3. Diesel and Petrol Prices Register a Record High Mark

Transportation fuel prices in the country touched a record high on Monday due to a spike in global crude oil prices and a fall in rupee. Diesel and petrol prices on 3 September reached Rs 71.15 per litre and Rs 79.15 per litre, respectively, in Delhi, a record high.

The spike in oil prices is due to a combination of factors such as President Donald Trump pulling the US out of a 2015 historic accord with energy-rich Iran and the rupee touching a new low at $71. So far this year, the rupee has weakened 11 percent, making it the worst performer among Asian currencies.

Retail prices of petrol and diesel in India track the global prices of these auto fuels, not crude, although they are broadly linked to crude oil price trends, which have firmed up.

Any rally in global crude oil price will impact India’s oil import bill and trade deficit as every dollar increase in oil prices would impact import bill by around Rs 10,700 crore on an annual basis.

(Source: Livemint)

4. Closing Bell: Sensex Registers Its Longest Losing Streak In Over Three Months

Indian equity benchmark Sensex closed over 600 points lower from Monday's high and clocked its longest losing streak in over three months.

The 31-stock index closed 0.86 percent lower at 38,312.52 and the NSE Nifty 50 Index closed below 11,600, down 0.84 percent.

The market breadth was tilted in favour of sellers. Ten out of 11 sectoral gauges compiled by NSE fell, led by NSE Nifty FMCG Index's 2.4 percent decline. On the flip side, NSE Nifty Media Index was the top sectoral gainer, up 0.5 percent.

(Source: Bloomberg Quint)

5. Gold Prices Fall Today After 3 Days, Silver Rates Slump

Gold prices fell after rising for three sessions on Monday, 3 September. Gold rates declined by Rs 100 to Rs 31,250 per 10 gram at the bullion market, amid sluggish demand from domestic jewellers and weak global trend, according to a PTI report. Taking a cue from gold prices, silver rates slumped below the Rs 38,000 mark by plunging Rs 650 to Rs 37,700 per kg due to reduced offtake by industrial units and coin makers. Gold prices had risen Rs 270 in the last three days.

In Delhi, gold of 99.9 and 99.5 per cent purity declined by Rs 100 each to Rs 31,250 and Rs 31,100 per 10 gram, respectively, according to the report. Sovereign gold, however, remained flat at Rs 24,500 per piece of 8 gram. Silver ready also dipped by Rs 650 to Rs 37,700 per kg and weekly-based delivery by Rs 420 to Rs 36,695 per kg. Silver coins, too, dropped by Rs 1,000 to Rs 72,000 for buying and Rs 73,000 for selling of 100 pieces.

In global markets, gold prices breached the psychological $1,200 level as the dollar rose on the back of worries about escalating global trade tensions.

(Source: Livemint)

6. Vedanta Resources Chairman Anil Agarwal to Take Company Private on 1 Oct

Vedanta Resources Plc Chairman Anil Agarwal will take the London-listed miner private on 1 October, after the holders of 26 percent of shares agreed to sell to his family trust Volcan Investments.

Volcan now holds or has received acceptances for 92.31 percent of Vedanta's shares, it said.

The trust said on Monday the $1 billion offer to take the miner private would remain open for acceptances from shareholders until further notice.

Volcan, which held about 67 percent of Vedanta before it announced in July its firm intention to make the buyout offer, was expected to face some shareholder resistance, with a large minority shareholder saying the offer undervalued the company.

Amid the going-private process, Vedanta, the first Indian company to list in London in 2003, is waiting to hear from a judicial committee in India on whether its copper smelter, which was shut by the southern state of Tamil Nadu, can be reopened.

(Source: Business Standard)

7. Relief in Sight for Adani, Tata and Essar’s Gujarat Power Projects

The end appears to be in sight for the issues plaguing the imported coal-based power plants in Gujarat owned by the Adanis, the Tatas and the Essar Group.

The high-powered committee (HPC) appointed by the state government in July has suggested that the tariff structure of the power purchase agreements (PPAs) be revised. The companies had sought a revision since the projects depend on coal imported from Indonesia. Recent changes in Indonesian regulation have rendered the coal imports costlier.

“The committee has submitted the report and the recommendations to GUVNL (Gujarat Urja Vikas Nigam Ltd) and SBI Capital, suggesting a fuel pass-through with a cap which can be revised after five years based on coal price movement,” said a person with knowledge of the matter.

The resolution for the three power projects will take 15-20 more days, he added, as the proposal has to go through a clearance process from the state government departments to the Chief Minister and the Cabinet.

(Source: The Hindu Business Line)

8. Benchmark 10-year bond yield hits 8%, closes at near 4-year high

The yield on the 10-year benchmark bond on Monday, 3 September, touched 8 percent during the day and closed at a nearly four-year high, as a continued surge in crude oil prices and trade war worried investors. The 10-year bond yield settled at 7.999 percent, a level last seen on 1 December 2014, from its previous close of 7.952 percent. Bond yields and prices move in opposite directions.

The GDP data, released after market hours on Friday, had showed that the economy grew at 8.2 percent in the June quarter, higher than market estimates, raising the expectations of a rate hike this year. The Bloomberg median estimate of 39 economists for GDP growth for Q1 was 7.6 percent compared with 7.7 percent in the March quarter.

The primary drivers of the bond yield were inflationary concerns raised by the central bank in its monetary policy (MPC) minutes and the consequent rate hike expectations of the market, said NS Venkatesh, chief executive officer, Association of Mutual Funds of India (AMFI).

(Source: Livemint)

9. The ‘Wise Owl’ of Mint Street: Urjit Patel completes two years as RBI Governor

There is a new twist to the British economist John Keanes’ famous quote that ‘it is your problem if you owe a hundred bucks to a bank, but it is the bank’s problem if you owe a million’ — the problem is of the central banker if unpaid loans run into billions. And to clear this ‘landmine’, which has been blamed on the previous UPA regime by Prime Minister Narendra Modi, RBI Governor Urjit Patel decided to follow “wisdom of an owl” as he went on to conduct the “deep surgery” initiated by his predecessor Raghuram Rajan to clamp down on loan defaulters, while seeking to safeguard the Indian banking system from any collateral damage.

As Patel completes two years in office as the RBI Governor, the jury is still out whether he has been a ‘hawk’ — as prescribed by many economists to contain inflationary pressures and to tame the monster of loan defaults — or a ‘dove’ as others, including those in the government, wanted him to always cut rates to boost growth.

(Source: The Financial Express)

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