Indian Rupee Strengthens to 85 per Dollar; Sensex Approaches 77,000 Mark
The Indian rupee appreciated sharply, reaching 85.97 against the U.S. dollar, marking its strongest level in over a month. This upward movement comes amid heavy foreign fund inflows and a reversal of speculative positions in favor of the rupee. The currency, which had previously touched 86.96, demonstrated a clear recovery in recent sessions.
The strength of the rupee is also supported by the Reserve Bank of India’s active currency management, including swap interventions and supportive macroeconomic indicators. Analysts note that the rupee is likely to maintain its upward trend in the near term, with technical support seen around 85.70 and resistance near 86.45.
Sensex Inches Closer to 77,000
Equity markets mirrored the rupee’s performance, with the benchmark BSE Sensex climbing to 76,905.51. The index gained 557.45 points, or 0.73%, on the day, marking its fifth consecutive session in the green. The broader Nifty index also showed similar strength, with both indices posting over 4% gains in the past week.
Foreign portfolio investors have played a critical role in this rally, pumping significant capital into Indian equity and debt markets. This surge in foreign investment comes amid expectations of stable policy signals from global central banks and optimism surrounding India’s economic outlook.
Market Drivers and Outlook
The recovery is being driven by a combination of factors:
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Robust Foreign Inflows: International investors are returning to Indian markets, driven by confidence in India’s growth story and favorable policy environment.
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Forex Reserves and Trade Data: Improved trade figures and rising forex reserves have added to the rupee’s strength and boosted investor sentiment.
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Global Monetary Policy: The U.S. Federal Reserve’s decision to pause interest rate hikes and hint at future cuts has weakened the dollar, strengthening emerging market currencies, including the rupee.
The recent rebalancing in the FTSE All-World Index is also expected to bring in close to $1.5 billion, further supporting the rupee and contributing to market buoyancy.
While foreign investors continue to buy aggressively, domestic institutional investors have been more cautious, booking profits amid the rally. This divergence has added a layer of complexity to the current market narrative but hasn’t disrupted the upward trend.
The Indian financial markets appear poised for further gains, buoyed by strong capital inflows, a stable macroeconomic backdrop, and global tailwinds. However, market participants remain watchful of any changes in geopolitical risks or global monetary policy shifts that could influence investor sentiment.
