Rupee erases early gains, ends 21 paise down

Mumbai: Reversing day`s early gains, rupee closed lower by 21 paise at 53.12 against dollar as relief to foreign funds on strenuous GAAR provisions seemed short-lived. Forex dealers said the fall in domestic unit would have been steeper but for RBI`s intervention.

Dealers said though General Anti-Avoidance rules (GAAR) has been postponed by one year, capital flows will take sometime to come back to Indian markets. "Though sentiments have been lifted after the GAAR deferment, capital flows will take some time to come back to Indian market," N S Venkatesh, Treasury Head of IDBI, said.

The rupee had gained an impressive 56 paise on Monday after Finance Minister Pranab Mukherjee had deferred the implementation of GAAR by one year from April 2013 in Parliament. After touching a high of 52.68 in early trade on Tuesday, the rupee, moving in tune with the stock market, slumped to a low of 53.31 before concluding at 53.12, down 0.40 per cent from previous close.

The Reserve Bank of India is believed to have intervened in the forex market when the rupee slumped to a low of 53.31. However, it could not be verified with the Reserve Bank. Alpari Financial Services (India) CEO Pramit Brahmbhatt said, "The rupee reversed the gains accumulated in last session on rising dollar index and falling Indian equity markets."

Meanwhile, the BSE barometer Sensex plummeted by nearly 370 points to its almost four-month low of 16,546.18 points on brisk selling after RBI`s weak outlook on rate cuts, amid persisting FIIs concerns on GAAR and fresh Eurozone worries. Brahmbhatt said the RBI`s weak outlook on rate cuts also weighed against the rupee.