Importers pull rupee to 44.76/$

The rupee tumbled 0.85 per cent to 44.76 a dollar today, its largest single-day loss in 10 months. With this, the Indian currency has depreciated close to 2 per cent over the past week. The market expects the rupee to breach the 45 mark, a level last seen in November 2004.

Led by a bearish outlook and increasing importer demand, the rupee lost heavily during the day. Cancellations from exporters added to the demand for dollars which, dealers said, was huge from corporates active in the non-deliverable forward market.

Firms were seen buying dollars in the Indian market and selling in the forward market to exploit an arbitrage of almost 10-15 paise.

The weakening of the rupee is set to hit importers hard in the coming months. Data culled from Capitaline Plus "" a database of Indian corporations "" show that there are about 1,015 non-oil companies that had collective exports worth Rs 1,07,572 crore and imports of Rs 1,12,316 crore in 2004-05.

These companies have been net importers to the tune of Rs 8,386 crore.

Six hundred and sixty companies have emerged as net exporters (worth Rs 36,660 crore) and 353 firms, net importers ( worth Rs 41,405 crore).

Food processing, ferro alloys, forgings, granite and marble, machine tools, mining and minerals, dyes and dyestuff, tea, coffee, rubber products, textiles, cement and pharmaceuticals, which use local raw materials, will be the major beneficiaries of a weak rupee.

However, computer hardware, cement products, fertilisers, aluminum, machine tools, copper, white goods and paper "" being net importers "" will be hit hard on account of rupee depreciation.

The pressure on the rupee has been triggered by strengthening of the dollar globally and the rising demand for oil following LPG shortage in the domestic market.

The market does not expect aggressive intervention from the Reserve Bank of India as the rupee is still overvalued on the basis of its real effective exchange rate (REER).

Jayant Lapsia, president of All-India Liquid Bulk Importers' and Exporters' Association, said the rupee depreciation would have a cascading effect on companies as India was a heavy importer of crude oil and edible oil.

India imports 70 per cent of its crude oil and the rise in oil prices this year has, along with growing machinery imports, widened the trade deficit in April-June to $15.8 billion from $11.5 billion in the previous quarter.

The effect of the depreciation of the rupee will largely be neutralised on those companies that have large imports as well as exports. The trading companies that procure local raw material will gain.

Overall, only 20 per cent of companies with high exports will be happy on account of a depreciating rupee.