DNA Money Edit: Rupee rumble points to tough days

The rupee's plunge to the life-time low of 69.93 against the US dollar on Monday, the biggest single-day fall in almost five years, hints at tough days ahead. The RBI governor Urjit Patel's recent words that the trade skirmishes have evolved into tariff wars and now we are possibly at the beginning of currency wars have become prophetic. Though rupee recovered from intra-day losses, sustained dollar demand pushed it down again. Most analysts believe that the Indian currency would breach the psychological level of Rs 70 to a US dollar soon.

As India imports around 80% of its crude oil requirements, prices of petrol and diesel will see a surge. Transportation may also head northward while fruits and vegetables become dearer and push up inflation, though marginally. Falling rupee will make all consumer goods using imported raw materials costlier. RBI, which has been struggling to contain inflation, may have to look for tougher measures and keep policy rates high.

Going forward, oil marketing companies and import-dependent consumer goods firms may surely take a hit while companies in information technology and pharmaceutical sectors will smile at increased earnings in dollar terms. The surge in IT stocks on Monday, despite an overall market slide, is an indication.