On Monday, the Indian rupee strengthened by 38 paise, closing at 85.03 against the US dollar, buoyed by consistent foreign investment, declining crude oil prices, and a positive trend in local stock markets. Forex analysts noted that robust domestic fundamentals, such as increasing foreign exchange reserves, played a significant role in uplifting investor confidence.

Rupee’s Performance and Market Dynamics

The rupee began the trading day at 85.29, fluctuating between a high of 84.96 and a low of 85.42 before settling at 85.03. This marks a recovery from Friday’s close of 85.41, where it had dipped by 8 paise.

• Key Factors Influencing the Rupee:
  • Rising foreign exchange reserves enhance India’s import cover.
  • Improved stability protects the rupee from external shocks.

Despite the positive momentum, there are concerns that geopolitical tensions, particularly between India and Pakistan, could exert downward pressure on the rupee. Such uncertainties often lead investors to seek safety in more stable assets, impacting emerging markets negatively.

Global Currency and Oil Market Trends

The dollar index, which measures the US dollar’s strength against a group of six currencies, was up by 0.13% at 99.60. In the oil markets, Brent crude prices fell 0.46% to $66.56 per barrel, contributing to a favorable environment for the rupee.

Insights from Market Analysts

Dilip Parmar, a Research Analyst at HDFC Securities, remarked, “The Indian rupee has started the week on a strong note, outperforming its Asian peers. A quick rebound in domestic equities, fueled by steady foreign investment and a stable geopolitical climate, has provided significant support.” He added that India’s growing foreign exchange reserves, combined with stable dollar index performance, reinforce this positive trend. For the near term, analysts predict the USD-INR pair might find support around 84.90 and face resistance at 85.70.

Equity Market Highlights

The Indian stock market also experienced significant gains, with the BSE Sensex soaring by 1,005.84 points (or 1.27%) to reach 80,218.37. Similarly, the Nifty index climbed 289.15 points (or 1.20%) to settle at 24,328.50. Foreign institutional investors were active, purchasing equities worth ₹2,952.33 crore on a net basis last Friday.

Strong Forex Reserves

According to the Reserve Bank of India, India’s foreign exchange reserves surged by $8.31 billion, reaching $686.145 billion for the week ending April 18. This marks the seventh consecutive week of growth, following a rise of $1.567 billion in the previous week. Notably, forex reserves had hit a record high of $704.885 billion at the end of September 2024.

In summary, the Indian rupee’s recent appreciation highlights the interplay of strong foreign investments, supportive domestic conditions, and the global economic landscape, positioning it favorably in the current market environment.