Market sources said there has been increased buying of the greenback by banks and importers on Monday morning hours, leading to weakening of the Indian currency
Indian rupee is not expected to see any strengthening from the current level of 71 against US dollar any time soon, despite the continuing rally on the Indian equity market, riding on Friday’s announcement of a 8 percent cut in corporate tax.
The rupee lost some steam on Monday morning trading hours, losing 14 paise to 71.08 against the US dollar, despite the BSE flag ship index S&P Sensex gaining another 700 points in Monday morning trade, after a 1,900 point jump on Friday.
As against the record equity market rally post announcement of the corporate tax cut, the Indian currency gained only 40 paise on Friday to close at 70.94 against the dollar.
“Internally the finance minister may have given a steroid to the market but the adverse external factors continue for rupee by way of elevated crude prices, US-China trade tensions and sagging exports from India,” Ajay Kedia, managing director of Kedia Commtrade and Research, told Arabian Business.
“We expect rupee to trade in the range of 70.95 and 71.60 against US dollar for the September futures,” Kedia said.
Market sources said there has been increased buying of the greenback by banks and importers on Monday morning hours, leading to weakening of the Indian currency.
Forex market analysts said the soon to be released data on the US manufacturing PMI will also have a bearing on the movement of the dollar-rupee exchange rate.
India’s Finance Minister Nirmala Sitharaman on Friday announced a sharp cut on corporation tax from 30 percent to 22 percent and a still lower corporation tax of 15 percent for companies created on or after October 1, 2019 in the manufacturing sector, in a move aimed at reviving private investment in the country.
While the 8 percent tax cut for existing companies are subject to the condition that these companies do not avail of any tax incentives or exemptions, the 15 percent tax proposed for new manufacturing units are linked to the condition that their production should begin on or before March 31, 2023.
Though corporate tax has been cut to 22 percent for companies earning a business income of $56.3 million (Rs 4 billion) and above, the effective tax rate on business income will be 25.17 percent because of applicable cess and surcharge.