The Indian rupee faced a slight setback on Thursday, falling by 7 paise to close at 83.55 against the US dollar, despite the domestic equity markets reaching unprecedented highs. The rupee’s performance was largely contained within a narrow trading range, reflecting resilience amid volatile movements in the dollar index influenced by recent US Consumer Price Index (CPI) data and Federal Reserve policy decisions.
At the interbank foreign exchange market, the rupee opened at 83.52 before settling at 83.55 against the American currency. This minor depreciation follows a brief appreciation on Wednesday, where the rupee had strengthened by 11 paise to close at 83.48 against the dollar.
Jateen Trivedi, VP Research Analyst for Commodity and Currency at LKP Securities, commented on the rupee’s performance: “The rupee traded sideways in a range of 83.52-83.57, maintaining stability despite volatility in the dollar index. While the rupee remains resilient, it continues to consolidate near its all-time low. A significant decline in the dollar index below 103 could bolster the rupee, but for now, we expect it to trade within the 83.20-83.75 range.”
On Thursday, the dollar index, which measures the greenback’s strength against a basket of six major currencies, rose by 0.17%, trading at 104.81. Concurrently, Brent crude futures, the global oil benchmark, fell by 0.84%, settling at $81.91 per barrel.
In domestic economic news, India’s industrial production growth decelerated to a three-month low of 5% in April 2024, primarily due to a lackluster performance in the manufacturing sector, despite robust activity in mining and power segments. Conversely, retail inflation showed a positive trend, reaching a one-year low of 4.75% in May, thanks to a marginal decline in food prices. This figure remains comfortably within the Reserve Bank of India’s target range of below 6%.
Despite the rupee’s modest decline, the Indian equity markets exhibited remarkable strength. The BSE Sensex surged by 204.33 points, or 0.27%, to close at a new all-time high of 76,810.90 points. The broader NSE Nifty also reached a record level, gaining 75.95 points, or 0.33%, to settle at 23,398.90 points. This rally was partly fueled by Foreign Institutional Investors (FIIs), who were net buyers in the capital markets on Wednesday, purchasing shares worth Rs 426.63 crore.
As global and domestic economic factors continue to evolve, market participants will closely monitor movements in the dollar index and crude oil prices, alongside the ongoing performance of the Indian economy and equity markets.