Rupee weakens by 3 paise at 63.65 against US dollar

 The rupee declined by 3 paise to 63.65 against the US dollar in early trade on Friday, extending weakness for the second day, at the Interbank Foreign Exchange due to appreciation of the American currency overseas.

Besides, month-end demand for the American currency from importers and a lower opening in the domestic equity market, weighed on the rupee, forex dealers said.

The rupee had shed 2 paise to close at 63.62 against the US currency in the previous session due to dollar demand from banks and importers.

Meanwhile, the benchmark BSE Sensex fell by 96.20 points or 0.34 per cent at 27,799.77 in early trade today. 

Additional $60 billion forex needed to fight volatilities: HSBC

As India's forex kitty is growing steadily, foreign brokerage HSBC on Friday said the country needs at least USD 60 billion more in reserves to fight a sustained period of global volatilities.

According to the global financial services major, India's forex reserves are above traditional norms but the country's "peculiar characteristics and experience" in recent crises suggest that about USD 60 billion more could buffer sufficiently against prolonged global financial tightness.

"We estimate an additional USD 60 billion of reserves, taking overall holdings to USD 420 billion, could take care of key vulnerabilities (such as unhedged external commercial debt, short-term external debt and portfolio outflows)," HSBC India Chief Economist Pranjul Bhandari said in a research note.

HSBC said India had lost USD 20 billion of foreign exchange reserves over the "taper tantrum" months of 2013.

However, since then, it has built up more than four times that amount.

At present, with about USD 360 billion (including USD 5.2 billion of net forward position) in reserves, India boasts of an import cover which is three times as large as the IMF's recommended value of three months, HSBC said.

Buying USD 60 billion of additional reserves would cost India USD 3.2 billion, the report said, adding that "anything more than this could really start hurting the fiscal balance".

The report noted that forex reserves are not the only line of defence available and as a second line of defence to forex reserves, swap arrangements with bilateral and regional partners, and similar mechanisms with G20 countries and multilateral organisations should be actively explored.

"Ultimately keeping the macro house in order, like lowering the twin deficits and inflation sustainably and increasing potential growth, is more important than reserve accumulation, as it can single-handedly make the economy resilient to shocks," HSBC said.

Sensex slides 84 points; bank stocks take a hit

 The benchmark BSE Sensex on Friday fell by 84 points to 27,811.84 as banking stocks plunged after RBI's stress test showed that deterioration in banks' asset quality is likely to continue for a few more quarters.

Sentiment was also hit after Greece failed to reach an agreement with its creditors ahead of a debt deadline, equity brokers said.

However, reports that monsoon has covered the entire country, except western Rajasthan, several days before its expected date lifted market mood to some extent.

The 30-share Sensex after opening in negative zone at 26,880.72 continued to slide as selling pressure gathered momentum amid a weak overseas trend. It touched a low of 27,675.16 before winding up 84.13 points or 0.30 percent down at 27,811.84. The index touched a high of 27,921.86 intra-day.

Also, the NSE Nifty ended 16.90 points or 0.20 percent down at 8,381.10 after shuttling between 8,408.55 and 8,339.70 intra-day.

However, both the Sensex and the Nifty indices posted their second-straight weekly gains by rising 495.67 points (1.81 pc) and 156.15 points (1.89 pc), respectively.

Reserve Bank of India's Financial Stability Report yesterday said that gross non-performing assets (NPAs) in the banking system have grown to 4.6 percent at the end of March this year from 4.5 percent in September.

Reacting to the news, the BSE banking index fell by 0.74 percent. Major losers from the Sensex were ICICI Bank, HDFC Bank and Axis Bank -- falling by up to 1.35 percent.

However, gains in TCS, NTPC, Infosys, Bajaj Auto, Cipla, Dr Reddy's, Maruti Suzuki, Tata Motors, Wipro, Lupin and HUL shares cushioned the fall in the indices.

Out of 30-Sensex constituents, 17 stocks ended lower.

Meanwhile, foreign investors bought shares worth Rs 280.21 crore yesterday.

Globally, Shanghai closed 7.4 percent down on fears that the Chinese stocks were overvalued after a year-long advance. European market was also down in their early trade.