India's Rupee Slides to Six-Year Low on Capital Outflow Concern

By Anil Varma

Oct. 8 (Bloomberg) -- India's rupee fell to the lowest level in six years on speculation a rout in global equities will encourage investors to take more money out of the nation.

The currency dropped for a fourth day, joining declines in all of Asia's 10 most-active currencies. India's benchmark share index fell 7.3 percent and Japan's Nikkei 225 Stock Average lost almost 10 percent following a slump in U.S. equities.

``The rupee market is concerned over the large amount of foreign investments that are being pulled out from India as well as elsewhere,'' said Nizam Idris, a foreign-exchange strategist at UBS AG in Singapore. ``Sentiment across currency markets is soured by extreme risk aversion.''


The rupee fell 1.4 percent to 48.63 versus the dollar as of 11:41 a.m. in Mumbai, according to data compiled by Bloomberg, the weakest level since August 2002. The rupee may decline to 49 before year-end, Idris said.

The Bombay Stock Exchange's Sensitive Index has fallen more than 46 percent this year, almost wiping out all of 2007's gains. Funds based abroad sold $9.8 billion more Indian shares than they bought this year, according to the Securities and Exchange Board of India.

To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.