In the early trading hours of Monday, the Indian rupee strengthened by 12 paise, reaching 85.86 against the US dollar. This upward movement was largely fueled by robust domestic capital inflows, offering vital support to the currency. However, market experts warn that persistent challenges, including fluctuating crude oil prices and liquidity issues, continue to threaten the rupee’s stability.
Rupee Gains Ground Amid Mixed Signals
Starting at 85.93, the rupee managed to gain ground, reflecting a positive shift from its previous close of 85.98 after appreciating by 38 paise on Friday. Forex traders note that while these gains are encouraging, the rupee remains susceptible to external factors that could impact its performance.
- Brent crude prices have recently surged towards $72 per barrel, primarily driven by escalating geopolitical tensions in the Middle East.
- Amit Pabari, Managing Director of CR Forex Advisors, emphasizes the rupee’s vulnerability to external shocks, particularly related to oil price volatility.
Strong Inflows Boost Market Confidence
On Friday, foreign institutional investors (FIIs) significantly contributed to market liquidity by purchasing equities worth ₹7,470.36 crore. This surge in inflows was attributed to several factors, including the FTSE March review and active fundraising efforts across various sectors.
Key highlights include:
- State-run enterprises raised ₹14,000 crore.
- Indian states successfully mobilized ₹40,100 crore through debt sales.
- Non-Banking Financial Companies (NBFCs) issued bonds worth ₹16,400 crore, further reinforcing investor confidence.
Market Trends and Forex Reserves
As of now, the US dollar index, which measures the dollar’s strength against a basket of six currencies, is slightly up by 0.06%, trading at 104.15. Meanwhile, Brent crude is experiencing a minor decline of 0.37%, currently priced at $71.89 per barrel in futures trading.
In the domestic equity market, the 30-share BSE Sensex rose by 563.05 points, or 0.73%, reaching 77,468.56 points, while the Nifty increased by 153.20 points, or 0.66%, to hit 23,503.60 points.
Furthermore, the Reserve Bank of India reported an increase in the country’s forex reserves, which rose by $305 million to $654.271 billion during the week ending March 14. This follows an impressive rise of $15.267 billion in the previous week, marking the highest weekly increase in two years. A significant contributor to this boost was the $10 billion forex swap executed by the RBI.
As the Indian rupee navigates through these turbulent waters, market participants will be keenly watching for further developments that could impact both domestic and international economic conditions.
