The steep slide in the rupee against the dollar persuaded the poster boys of India Inc into selling dollars. A large construction company and two top-tier information technology firms on Friday sold $100-125 million each, industry sources and bankers told Business Standard.
This combined with the Reserve Bank of India (RBI)’s intervention in the foreign exchange market helped the local currency in recovering some of its losses in Friday’s trade. The rupee recovered 44 paise from the day’s low and closed at Rs 53.48. The exchange rate was still seven paise lower than Thursday’s close.
Market participants estimate that $500-700 million was sold by the central bank and local exporters, which, other than the three large companies, also included several small and mid-sized players. They said these trades prevented the rupee from breaching the 54-mark.
According to sources, the Mumbai-based construction company sold dollars in early trade, while the two software outsourcers entered the market later in the day. “We sold dollars in small quantities,” said the chief financial officer of one of the software firms.
A senior executive of the construction firm did not confirm the development but said its treasury team may have done the trades based on requirements. “Given the size of our loan book, the receivables position, $100 million is not a very big amount for us. There is no change in our hedging strategy. We always aim to reduce the impact of volatility in currency rates on our financials,” he said.
Industry analysts said the slide in rupee provided exporters with an opportunity to convert their dollars into rupees at attractive rates. The local currency has depreciated by five per cent since the beginning of this financial year.
“These are view-based trades. The market is expecting the RBI to intervene and arrest the fall in rupee. With the currency trading close to 54-level, there is an opportunity to sell dollars at an attractive rate. It is not only the big boys, even small exporters have started entering the market and selling dollars,” a senior executive with a large European bank in India said.