Reversing day’s early gains, rupee closed lower by 21 paise at 53.12 against dollar on Tuesday 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,” Mr N S Venkatesh, Treasury Head of IDBI, said.

The rupee had gained an impressive 56 paise yesterday after Finance Minister Mr 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 today, 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 Mr 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.

Mr Brahmbhatt said the RBI’s weak outlook on rate cuts also weighed against the rupee.

RBI Deputy Governor Mr Subir Gokarn today said, “We started that process (reducing interest rates) in April. But if you look at our inflation projections in relation to what we consider as long-term or medium objective, there are inflation pressures. That in a sense, limits the room that we have to reduce rates.”

Replying to a query on rupee fluctuations, Mr Gokarn said there may be some speculative opportunities and RBI is taking necessary steps to curb that.

He added that capital flows will be the ultimate determinant for the currency.

The rupee premium for the forward dollar fell back on fresh receivings by exporters.

The benchmark six-month forward dollar premium payable in October turned negative to end at 172-174 paise from Monday’s close of 174-176 paise and maturing in April also settled weak at 305-307 paise from 310-312 paise.

The RBI fixed the reference rate for the US dollar at 52.8550 and for euro at 68.8078.

The rupee reacted downwards to 85.84/86 against the pound sterling from overnight close of 85.52/54 and also declined to 69.22/24 per euro from 68.94/96. It fell back against the Japanese yen to 66.59/61 per 100 yen from last close of 66.28/30.

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