Rupee falls 3 paise to close at 83.69 against US dollar post Union Budget 2024

The rupee declined 3 paise to 83.69 against the US dollar on Tuesday after the government raised tax rates on capital gains in the Union Budget for Fiscal Year 2025.

As per the PTI report, the forex traders noted, a weak tone in the US dollar and weakness in crude oil prices also put pressure on the domestic unit, besides the raised tax rates on capital gains.

At the interbank foreign exchange market, the local unit opened at 83.64. It touched an intraday high of 83.61 and an all-time intraday low of 83.72 against the dollar during the trading session, reported PTI.

Registering a fall of 3 paise from its previous close, it finally settled at 83.69 against the US dollar.

The rupee consolidated in a narrow range on Monday to settle 4 paise higher at 83.66 against the American currency.

Head of Treasury and Executive Director of Finrex Treasury Advisors LLP, Anil Kumar Bhansali, said, "Dollar buying continued to be the theme after the increase in long-term capital gains (LTCG) and short-term capital gains (STCG) and then the removal of indexation benefits."

He noted the rupee could soon weaken to 84 as the RBI manages the influx of US dollars.

Meanwhile, according to the news agency, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.03 per cent at 104.34.

Brent crude futures, the global oil benchmark, were trading higher by 0.24 per cent at USD 82.60 per barrel, reported PTI.

Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, noted, "The rupee touched a record low of 83.72 after Finance Minister Nirmala Sitharaman raised tax rates on capital gains, which led to a decline in the domestic equity markets. The rupee opened higher earlier today on a weak tone in the US dollar and weakness in crude oil prices," according to PTI.

"We expect the rupee to trade with a slight negative bias on weakness in the domestic markets. However, the decline in crude oil prices and the weak US dollar may support the rupee at lower levels. Any intervention by the RBI may also support the rupee. Traders may also take cues from existing home sales and Richmond manufacturing index data from the US. The USD/INR spot price is expected to trade in a range of Rs 83.40 to Rs 84," Choudhary added.

As per the news agency report, the 30-share BSE Sensex fell 73.04 points or 0.09 per cent to settle at 80,429.04 points and the Nifty dropped 30.20 points or 0.12 per cent to 24,479.05 points, in the domestic equity market.

The government on Tuesday proposed to rationalise the capital gains tax rate and holding period of various assets, including securities and immovable properties, in Union Budget 2024.

Listed financial assets will have to be held for more than 1 year, while unlisted financial assets and all non-financial assets will have to be held for at least 2 years to qualify for long-term capital gains tax.

As per the changes proposed in the Union Budget 2024, STCG on listed equity, equity-oriented mutual funds and units of a business trust has been increased to 20 per cent from 15 per cent.

The LTCG on these securities is proposed to be hiked to 12.5 per cent from 10 per cent. LTCG up to Rs 1.25 lakh annually will be exempt from tax, up from Rs 1 lakh currently.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they sold shares worth Rs 2,975.31 crore, according to exchange data, reported PTI.

(With inputs from PTI)