62, 63, 64... and counting. Is it 2013 all over again for the plunging rupee?

LOSING CURRENCY As ` hits a 20-month low against the dollar, analysts signal more worries ahead

NEW DELHI/MUMBAI: As the rupee plunged to a 20-month low of 64.23 to a dollar on Thursday, driven by investors’ tax worries, everyone from individuals to policymakers seemed to have one question: is the rupee headed towards the lows it recorded in 2013?

Two years ago the rupee went into a tailspin, hitting a record low of 68.85 to a dollar in August 2013, driven by fears that the US Federal Reserve will start unwinding its stimulus programme. This had prompted foreign portfolio investors (FPIs) to move funds away from emerging markets including India.

The resultant dollar flight had pummelled the rupee’s value.

The proximate reasons for the fall in the value of the rupee — it has declined nearly 4% since March from about 61.5 to a dollar to more than 64 now — are more domestic.

A spurt of tax notices to FPIs have roiled investor sentiment. While finance minister Arun Jaitley, in the budget for 201516, had proposed to scrap minimum alternate tax (MAT), the government has said that FIIs were asking for “retrospective exemption” of MAT.

MAT is a kind of corporate income tax on capital gains made by FIIs.

Heavy selling by FPIs has set off a dollar outflow, pushing down the rupee’s value.

According to the National Securities Depository Ltd, FPIs have sold shares worth `1,774 crore on Thursday. In May alone, foreign investors have pulled out `5,241 crore from the equities market.

Analysts said there could be further correction in the stock market, as there was nothing positive on the horizon, unless some good news emerged on the government’s reforms front. This could hammer down the rupee even further.

“There could be a possibility of a shift in FII flow from India to better-performing markets such as China, which is up 40% this year, along with other markets including Indonesia,” said Navneet Damani, associate vicepresident at Motilal Oswal.

Besides, rising global crude oil prices over the last few days, which are currently hovering around $68 a barrel, have push ed up demand for the greenback.