Tracking solid capital inflows, rupee gains for third straight session
The rupee gained against the dollar on Tuesday, rising for the third straight session primarily driven by strong capital inflows even as domestic bourses fell, pausing a sharp rise in the previous two sessions as rising crude oil prices dented investor sentiment.
Reuters quoted the rupee last at 75.25 per dollar, and the PTI reported that at the interbank forex market, the currency opened at 75.54 and touched an intra-day high of 75.27. It finally closed at 75.29, registering a rise of 24 paise over its previous close of 75.53.
The rupee had gained 0.25 per cent on Monday to start the current financial year on a high, supported by a solid rally in domestic stocks.
Solid foreign fund inflows and a weaker dollar helped the rupee.
Sriram Iyer, a Senior Research Analyst at Reliance Securities, told PTI that the rupee appreciated against the US dollar on Tuesday, supported by offshore funds returning to domestic equities.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.09 per cent down at 98.90.
“Persistent risk-on sentiments, weak dollar index and stronger regional (Asian) currencies have been supporting the local unit (rupee) in northbound movement,” Dilip Parmar, Research Analyst at HDFC Securities, told PTI.
“On the global front, investors are assessing measures taken against Russia and China’s economic growth outlook as Shanghai remained in lockdown. The near-term focus will remain RBI monetary policy decision and stance,” Mr Parmar added.
That comes after the currency closed out the 2021-22 financial year with a loss of nearly 4 per cent, tracking a general surge in crude oil prices from the ongoing Russia-Ukraine war.
Still, in recent sessions, what has helped the rupee’s appeal is foreign institutional investors turning in favour of India’s capital markets.
Indeed, the latest stock exchange data showed FIIs remained net buyers in the capital market on Tuesday as they bought shares worth Rs 374.89 crore.
That on a day when the 30-share BSE Sensex slipped 435 points or 0.72 per cent to close at 60,177, while the broader NSE Nifty moved 96 points or 0.53 per cent lower to settle at 17,957.
The domestic indices had climbed nearly 3.5 per cent each in the last two sessions.
According to Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking Ltd, a PTI report showed that the rupee has perked up by around 0.90 per cent this week.
“However, going forward, the rupee is unlikely to hold on to the recent gains as the concerns about new sanctions against Russia by the western nations have led to a strong retreat in crude oil prices, accentuating the tight global supply scenario,” Ms Sachdeva said.
The geopolitical crisis dominates the sentiments and is likely to weigh on the domestic currency. The expectations of rapid-fire rate hikes by the US Fed to rein in decades-high inflation are also keeping the dollar index buoyant, a key headwind for the Indian rupee, she noted.
Markets are now focused on the minutes of the last US Fed meeting and the RBI MPC outcome, both scheduled this week, for further cues about the monetary policy stance of the respective central banks.
“We believe that the rupee is likely to witness renewed selling pressure in the coming days, wherein the 75.20 mark will act as a stiff hurdle for the rupee-dollar exchange rate,” added Ms Sachdeva.
Asian and emerging market peers were stronger and lent support while the markets also shrugged off high crude oil prices.
“Exporter selling and lumpy corporates were major drivers of Rupee appreciation. With oil prices stable, the rupee is seeing some FPI inflows,” said Anindya Banerjee, Vice President for Currency Derivatives and Interest Rate Derivatives at Kotak Securities.
Mr Banerjee further noted that “we could see volatility increasing during the second half of this week. We expect a range of 75.00 and 75.80 on the spot, over the near-term.”
