On December 19, 2024, Sri Lanka's rupee depreciated to 292.70/293.00 against the US dollar, a decline from 291.25/50 the previous day. This depreciation reflects ongoing economic challenges in the country, exacerbated by rising inflation and a significant food tax that has drawn criticism from opposition legislators, who are urging the government to reduce the 40 percent tax on rice amidst rising prices and shortages [6be4c89c].
In conjunction with the rupee's decline, bond yields have increased, with a bond maturing on September 15, 2027 quoted at 9.75/80 percent, while those maturing in 2028 and 2029 are quoted at 10.10/15 percent and 10.65/70 percent respectively [6be4c89c]. The All Share Price Index rose by 0.48 percent to 14,672, and the S&P SL20 increased by 0.56 percent to 4,428, indicating some resilience in the stock market despite the currency's depreciation [6be4c89c].
Meanwhile, in India, the rupee dropped 12 paise to an all-time low of 85.06 against the US dollar on the same day, following a hawkish stance from the US Federal Reserve, which cut rates by 25 basis points but indicated a cautious monetary policy [132fa5aa]. The dollar index rose by 0.01% to 108.03, and the rupee had previously closed at 84.94. Additionally, the US 10-year bond yield increased to 4.51% [132fa5aa]. Foreign Institutional Investors offloaded Rs 1,316.81 crore in capital markets, contributing to a significant drop in the stock market, with the BSE Sensex falling by 910.95 points to 79,271.25 and Nifty dropping by 281.15 points to 23,917.70 [132fa5aa].
The economic landscape in both countries is influenced by external factors, including the recent decision by the US Federal Reserve to cut rates, which has caused significant drops in US stocks [6be4c89c]. Additionally, geopolitical dynamics are shifting as China plans to resume maritime research in the Indian Ocean after a one-year ban, with discussions ongoing between Sri Lankan President Anura Kumara Dissanayake and Chinese officials regarding various projects [6be4c89c]. This complex interplay of domestic and international factors continues to shape the economic outlook for both Sri Lanka and India as they navigate through these turbulent times.