Indian Rupee Declines, Set for Worst Month Since Asian Crisis

By Anoop Agrawal

Sept. 29 (Bloomberg) -- India's rupee slumped, heading for its worst monthly loss since the Asian financial crisis in 1997, as global investors sold emerging-market assets.

The rupee fell to the lowest in almost two weeks on speculation the $700 billion rescue package for banks in the U.S., the world's largest economy, won't halt a slowdown in global economic growth. Overseas funds have already cut holdings of Indian shares equivalent to more than half of their net purchases last year.

``There won't be any respite for the rupee in the near term because of uncertainty of the financial crisis being sorted anytime soon,'' said Parthasarathi Mukherjee, president of treasury at Axis Bank Ltd. ``We may see an accelerated fall in the rupee.''

The rupee declined 6.2 percent this month to 46.92 against the dollar as of 9:33 a.m. in Mumbai, the biggest monthly drop since November 1997, according to data compiled by Bloomberg. The currency reached 46.9750 last week, the lowest since July 2006.

Overseas investors have sold $9.2 billion more of local equities this year than they bought, according to data from the Securities & Exchange Board of India. They bought a record $17.2 billion in stocks last year which helped the rupee complete its best annual gain in at least 34 years.

The Bombay Stock Exchange Sensitive Index, or Sensex, is set for its first annual decline since 2001.

The rupee is the second-worst performer this year among the 10 most-active Asian currencies excluding the yen.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.