Indian rupee gains 22 paise as domestic equities, FII inflows support recovery

The Indian rupee gained 22 paise to reach 89.45 against the U.S. dollar in early Monday trading, bolstered by a rise in domestic stocks and steady inflows from foreign investors.

Market Drivers

Foreign exchange analysts noted that a combination of corporate dollar inflows and global oil prices—with Brent crude maintaining a position near USD 60 per barrel—helped improve investor confidence.

At the interbank foreign exchange market, the domestic unit opened at 89.53 before strengthening to 89.45, marking a 22-paise improvement from its previous close. This follow-up performance comes after the rupee climbed 53 paise on Friday to settle at 89.67.

Analyst Perspectives

Despite the recent recovery, experts suggest the currency still faces long-term hurdles. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that while the USD/INR pair has rebounded roughly 2% from its latest lows, it remains down by 5% on a year-on-year basis.

"The broader depreciation trend remains intact despite the near-term consolidation," Bhansali observed.

He further pointed to significant intervention by the Reserve Bank of India (RBI) last week, where state-run banks sold heavy amounts of dollars to pull the rupee back from recent record lows. Bhansali added that the currency is also finding support from a narrowing trade deficit in November and a shift in Foreign Portfolio Investors (FPIs) becoming net buyers in the Indian equity market.

Global and Domestic Indicators

• Dollar Index: The greenback’s strength against a basket of six major currencies edged up 0.04% to 98.63.
• Crude Oil: Brent crude futures rose 0.83% to trade at USD 60.97 per barrel.
• Equity Markets: The 30-share Sensex climbed 210.57 points to 85,139.93, while the Nifty rose 154.80 points to 26,121.20.
• FII Activity: Exchange data showed foreign institutional investors bought equities worth Rs 1,830.89 crore on Friday.

According to the latest RBI data, India’s foreign exchange reserves rose by USD 1.689 billion to reach USD 688.949 billion for the week ending December 12. This follows a USD 1.033 billion increase in the preceding week.

With inputs from PTI