Re keeps sliding on capital outflow fears

The rupee declined for the third week in a row on concerns that prolonged financial turmoil and a deepening global economic slump would increase capital outflows.

The currency approached a record low as the Bombay Stock Exchange’s Sensitive Index slumped 6.4 per cent this week. The Standard & Poor’s 500 Index slid 4.3 per cent yesterday to its lowest since 1996 after Moody’s Investors Service said it may cut JPMorgan Chase & Co’s credit rating. The Reserve Bank of India slashed interest rates on March 4.

“Financial markets are reeling under pressure and the rupee is bearing the brunt,” said Jai Prakash, a currency trader at state-owned Andhra Bank in Mumbai. “The bias will remain for the rupee to weaken.”

The currency fell 1.1 per cent this week to 51.7025 a dollar at close in Mumbai. It touched a record-low of 52.185 on March 3. It may end the month at 52, Prakash said.

The MSCI Asia Pacific Index of shares completed a fourth weekly loss.

Overseas investors increased sales of Indian equities in the first three days of this week. They sold an average $130.4 million more than they bought, compared with $83.9 million last week, data from the Securities & Exchange Board of India show.

Net sales by foreign funds reached $2.1 billion this year, adding to a record $13.3 billion in 2008.