In a surge of positivity, the Indian rupee appreciated by 7 paise to close at 82.91 against the US dollar on Friday. This upward trajectory was buoyed by a robust performance in domestic equities and a weakened greenback against major global currencies. Analysts attribute the positive sentiment to the recently unveiled interim Budget for the fiscal year 2024-25, where Finance Minister Nirmala Sitharaman emphasized fiscal prudence.
Opening at 82.91 at the interbank foreign exchange market, the rupee hit an intraday high of 82.82 and a low of 82.93. Ultimately, it settled at 82.91 (provisional), marking a 7 paise increase from its previous close of 82.98. Minister Sitharaman’s announcement of an 11 percent hike in capital expenditure for the next fiscal year, coupled with a commitment to maintaining a world-beating economic growth rate, left a positive impact on the currency.
The Modi government’s continued commitment to fiscal responsibility in the interim Budget, refraining from populist measures, is seen as a strategic move. This approach is expected to trim the fiscal deficit to 5.1 percent of the GDP in the next fiscal year and further to 4.5 percent in FY26.
Forex traders anticipate a positive bias for the rupee, attributing it to the weakened tone in the US dollar and a global rise in risk appetite. Additionally, a decline in crude oil prices is expected to lend further support. However, caution is advised as profit booking by Foreign Institutional Investors (FIIs) may lead to outflows, potentially capping sharp gains in the rupee.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, remarked, “Any recovery in crude oil prices may also weigh on the rupee at higher levels.” Traders are closely watching US non-farm payroll reports and factory order data for cues, with expectations that the US will add jobs at a slower pace.
The dollar index, measuring the greenback’s strength against a basket of six currencies, was trading 0.11 percent lower at 102.93. Choudhary highlighted, “The US dollar declined on hawkish Bank of England monetary policy, as the Bank of England (BoE) kept interest rates unchanged at 5.25 percent.”
In the global oil market, Brent crude futures, the benchmark for oil prices, rose by 0.60 percent to reach USD 79.17 per barrel.
On the domestic front, the equity markets mirrored the positive sentiment. The Sensex advanced 440.33 points (0.61 percent) to close at 72,085.63 points, while the Nifty rose by 156.35 points (0.72 percent) to reach 21,853.80 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, offloading shares worth Rs 1,879.58 crore, according to exchange data. Despite this, the overall mood suggests a prevailing optimism in the economic landscape.
