India’s rupee fell, headed for its biggest weekly loss of the year, as a deepening global economic slump saps demand for emerging-market assets. The currency traded near an 11-week low versus the dollar and the Bombay Stock Exchange’s Sensitive Index was poised for a 7.6 percent weekly drop, the benchmark’s largest slide since December. Funds based abroad increased net sales of Indian stocks this year to $1.3 billion as central bank Governor Duvvuri Subbarao said Feb. 18 the impact of the global recession on the domestic economy has been “much sharper” than expected. “Pressure has increased on the rupee to weaken because of fears of bigger capital outflows,” said K.V. Mallik, a Kolkata- based treasurer at state-owned UCO Bank. “The equity-market outlook is weak. The rupee is also lower because of some arbitrage between the local and offshore forward markets.” The rupee weakened 2.4 percent this week to 49.8850 per dollar as of 10:09 a.m. in Mumbai, according to data compiled by Bloomberg. The currency, which slid 0.5 percent today, reached 50.0625 on Feb. 18, the weakest since Dec. 3. Offshore forwards contracts indicate traders bet the rupee will trade at 50.14 in a month, compared with expectations of 48.83 on Feb. 13. Forwards are agreements in which assets are bought and sold at current prices for future delivery. India’s $1.2 trillion economy may expand 7.1 percent in the year to March 31, 2009, the weakest pace in six years, according to government estimates. Growth is cooling as recessions in the U.S., Europe and Japan take their toll on exports. Trade Minister Kamal Nath said Feb. 13 that overseas sales may increase 15 percent in the year ending March 31, compared with an earlier target of 23 percent. Shipments fell 22 percent from a year earlier in January, declining for the fourth month in a row, according to Trade Secretary Gopal K. Pillai. The current-account deficit, a broad measure of trade flows, widened to a record $12.5 billion in the last quarter, according to the central bank.

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