 "Rupee up, bulls back: What's happening in India's markets?")
Indian investors and forex traders have recently had a couple of reasons to celebrate. It appears that the financial markets in the country are in comeback mode.
The Indian rupee is finally limping back up against the US dollar. The stock market, having taken several hits in the past few months, are now finally consistently in the green.
Here’s an in-depth look at what is happening in the Indian financial landscape at the moment.
Favourable momentum in INR-USD exchange
The Indian rupee opened near a three-month high on Tuesday (March 25).
With foreign inflows, positive domestic equities, and geopolitical optimism lifting the sentiment around the currency, the rupee opened at 85.58 against the US dollar on Tueday, marking its strongest level since December 31, 2024, when it traded at 85.61.
In the previous session, the domestic unit had closed at 85.61, gaining 37 paise and wiping out all of its year-to-date losses.
Over the last seven trading sessions, the rupee has appreciated by 154 paise, placing it at the top of the performance chart among Asian currencies for the month.
What’s behind the rupee’s rise?
Forex dealers say the rally has been aided by robust domestic equity markets and hopes of progress in ceasefire talks between Russia and Ukraine. These factors have helped maintain liquidity and prompted traders to unwind dollar long positions.
Intermittent foreign portfolio investor (FPI) inflows and repatriation of dollar earnings by Indian corporates ahead of the March 31 fiscal year-end have underpinned this strength.
Dilip Parmar, Research Analyst, HDFC Securities, pointed out another reason: that the sentiments turned positive ahead of the US representative visiting India ahead of April 2, reciprocal tariff implementations.
Impact Shorts
More ShortsConcerns remain
“Exporters are waiting for better levels to hedge. However, if 85.50 breaks decisively then maybe we are approaching 84.75”, said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP.
Despite the upbeat backdrop, the currency did weaken slightly in early trade on Tuesday, slipping 23 paise to 85.84 against the greenback.
While the rupee has risen more than 2 per cent in March, some market participants remain cautious. Analysts note that seasonally favourable factors may have largely played out, and further appreciation could be limited unless new catalysts emerge.
Others warn that the market may be underestimating the risks the rupee faces, particularly from US trade policy.
Bulls back on D-Street
The Indian stock market has also received the boost, with bulls taking charge of Dalal Street after a drawn out hiatus.
Tuesday marked the seventh day that benchmark Indian indices (Sensex and Nifty 50) started the day in green. This has been the longest winning streak for the markets since September last year.
The success is largely attributable to foreign institutional investors (FIIs) turning net buyers in recent sessions, injecting significant capital into Indian equities.
Strong economic fundamentals, including robust tax revenues, easing inflation, and fair stock valuations, have supported investor confidence.
In recent days, banking and energy stocks have performed exceptionally, leading the rally in the share market. Declining US treasury yields and a dovish stance by the US Federal Reserve have improved the appeal of emerging markets like India as well.
On Tuesday, the trend seemed to fumble, closing on a flat note instead of a positive one. The 30-share Sensex ended with gains of 32.8 points or 0.042 per cent at 78,017.19. The broader Nifty 50 index ended the day with a loss of 52.2 points or 0.22 per cent at 23,606.15.
While the winning streak was broken, the resilience of Indian markets in the face of uncertainties the world over remains impressive.
With inputs from agencies
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