The Indian Rupee has appreciated against the US Dollar for five consecutive sessions, reaching 86.57. This rise follows a declining trend of five months and coincides with a fall in the trade deficit and rising crude oil prices. Foreign portfolio sales persist amid liquidity challenges in the banking system, while Indian stock indices see gains due to strong domestic buying and positive global sentiment.
The Indian Rupee has demonstrated significant resilience, closing stronger against the US Dollar for the fifth consecutive session, finishing at 86.57 on Tuesday, compared to 86.80 on Monday. This marks the longest winning streak since September of the previous year, reflecting a 1.08 percent increase for the month of March after a prolonged decline over the preceding five months.
Despite the Rupee’s gains, foreign portfolio investors have continued their selling trend amidst escalating crude oil prices, having sold Rs 4,488 crore on Monday alone, accumulating sales of Rs 1.43 trillion this year to date, as per data from the NSE. Meanwhile, the Dollar index, which gauges the Dollar’s performance against a selection of international currencies, fell 0.04 percent to 103.32 and experienced a notable drop of over 3.6 percent this month, its weakest performance since November 2022.
Significantly, India’s merchandise trade deficit fell to a three-and-a-half-year low of $14.05 billion in February, attributed to substantial reductions in both exports and imports, influenced by diminishing global petroleum prices and heightened economic uncertainties. Additionally, crude oil prices increased for the third consecutive day amid ongoing tensions in the Middle East, with Brent crude rising 1.45 percent to $72.10 per barrel, and WTI crude climbing 1.55 percent to $68.63 per barrel as of 3:20 PM IST.
The Indian banking sector is grappling with a liquidity deficit approximately amounting to Rs 2 trillion as of March 16, highlighting the urgent need for intervention. Analysts suggest that this liquidity shortfall might compel the Reserve Bank of India to absorb a substantial portion of inflows to stabilize liquidity levels and enhance foreign exchange reserves.
Concurrently, the Indian benchmark indices, including Nifty and Sensex, gained over 1 percent on Tuesday, fueled by positive global market sentiment and robust domestic institutional investment, indicating an optimistic outlook for Indian equities.
In summary, the Indian Rupee’s recent surge against the US Dollar showcases its resilience, bolstered by favorable market conditions despite ongoing foreign selling and rising crude prices. The trade deficit’s reduction and the banking sector’s liquidity challenges also play critical roles in shaping the economic landscape, while equity indices reflect growing investor confidence. The overall scenario suggests cautious optimism for the Indian economy moving forward.
Original Source: www.business-standard.com
