Rupee Surges as Markets Rally: Strongest Gain in Over a Month
MUMBAI: The Indian rupee made a significant comeback on Friday, climbing back to the 85 level against the US dollar, marking its strongest performance in over a month. This surge was fueled by robust foreign fund inflows and a reduction in speculative long-dollar positions. Concurrently, both the Sensex and Nifty indices continued their upward trajectory, achieving their fifth consecutive session of gains.
Rupee’s Remarkable Weekly Performance
The rupee’s impressive weekly performance saw it strengthen by 1.2%, closing at 85.97 against the dollar, a rise of 40 paise from the previous session’s 86.37. It even reached a 10-week high of 85.94 during trading. According to Dilip Parmar from HDFC Securities, the rupee’s rise past the 86 mark for the first time since January was driven by a surge in foreign investments in India’s capital and debt markets. Additionally, stronger-than-expected trade data and increasing foreign exchange reserves, bolstered by the Reserve Bank of India’s (RBI) dollar/rupee swap interventions, further supported the local currency. Parmar noted that the rupee has emerged as the top performer among Asian currencies this month, with immediate support at 85.70 and resistance at 86.45. However, if it fails to maintain above 85.90, depreciation pressures may arise.
Impact of Federal Reserve’s Decisions
The recent decision by the Federal Reserve to hold interest rates steady, coupled with signals of potential future rate cuts, contributed to the dollar’s decline, which in turn supported the rupee’s strength. Jateen Trivedi from LKP Securities highlighted that large foreign banks were actively offering dollars in the dollar/rupee pair. Furthermore, equity inflows linked to the FTSE All-World Index rebalancing, effective from Friday, are expected to bring in approximately $1.5 billion, providing additional support to the rupee.
Stock Market Performance
On the stock market front, the Nifty index rose by 0.7% on Friday. After a brief dip at the opening, both the Sensex and Nifty reversed their early losses and continued to gain throughout the session. The Sensex closed up 557 points at 76,906, while the Nifty increased by 160 points to reach 23,350. Over the past five sessions, both indices have gained over 4%, marking their best weekly performance in more than four years. This rally was largely driven by strong buying from foreign funds, which invested a net Rs 7,470 crore into stocks, while domestic funds were net sellers at Rs 3,202 crore, according to BSE data.
Looking Ahead
Market sentiment is expected to be influenced by upcoming US economic data, including flash services and manufacturing figures set to be released on Monday. As foreign portfolio investors, who had been selling Indian equities since late last year, have turned buyers in two of the last four sessions, analysts are closely monitoring these developments for their potential impact on the markets.
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