The Indian rupee weakened against the US dollar on Tuesday after local equities declined amid initial trends indicating a narrow win for the PM Narendra Modi-led government.
The local currency weakened 38 paise to close at Rs 83.53 against the US dollar, after opening at Rs 83.38. The rupee had closed at Rs 83.14 on Monday.
The dollar index dropped to 104.09, while US 10-year yields fell to 4.41%. Oil prices declined by over $2 per barrel to reach multi-month lows, fueled by investor concerns regarding demand trajectory.
Indian equity gauges plummeted over 6%, wiping off exit poll gains, as trends suggest a narrow win for incumbent Prime Minister Narendra Modi's BJP.
Analysts expect market volatility to remain high in light of the election trends.
"Exporters are advised to take hedges at current levels of Rs 83.41 and importers are advised to take hedges below Rs 82.20 levels," Mecklai Financial wrote.
Amit Pabar of CR Forex Advisors concurred on the relationship between market volatility and election results.
"Well, what needs to be observed is whether the expected seats are secured by the ruling government to keep the euphoria alive. Anything less than expected can hurt sentiments in the short term and add pressure on the rupee," he wrote.
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