The Indian rupee on Tuesday lost 0.41 paise to close at 79.36 against the dollar on concerns the current account deficit would widen more than anticipated after the trade deficit for June hit an all-time high. Moreover, the dollar continued to rule strong in expectation of aggressive rate hikes by the Federal Reserve.
Economists are pencilling in a CAD of 3.2-3.5% of the GDP for the current fiscal, far higher than the 1.2% in 2022. However, with the June trade deficit coming in at a record $25.63 billion, thanks to an increase in crude oil and coal imports, there is concern the CAD could be higher. Sonal Varma, economist at Nomura, wrote she expects the current account to remain on a deteriorating path in the next few quarters, due to a moderation in oil exports, steady domestic demand, inelastic demand for select commodities and a global growth slowdown.
Foreign Portfolio Investors (FPI) have been on a selling spree since October, 2021. In 2022 so far, they have sold stocks worth $30 billion.
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