Rupee to draw support from return of foreign flows amid tech meltdown
The rupee has advanced 0.5% so far this week, hitting a two-week high of 94.32 in Thursday's session before settling at 94.4750; It is expected to open largely flat, with a slight positive bias
The Indian rupee is set to benefit on Friday from a resurgence of foreign investment in Indian markets following a month-long exodus, with a technology sector downturn providing a positive catalyst. The currency has gained 0.5% this week, reaching a two-week peak of 94.32 on Thursday before closing at 94.4750. Trading is expected to open flat on Friday with a slight upward bias.
The Indian rupee, which has faced pressure throughout the year and relied on central bank support, has found respite this week from two factors that have dominated the situation - falling oil prices and increased foreign equity investments. Falling oil prices are attributed to expectations that Republican Party's losses in the US midterm elections could limit President Donald Trump's ability to maintain tension with Iran.
Simultaneously, foreign investors have been purchasing Indian equities, with the decline in AI-linked technology stocks potentially uplifting markets that had been adversely affected by capital flowing into the AI trade. The shift in these trades is now drawing attention back to Indian equities. The technology sector downturn worsened on Thursday after the Democratic Party's victory in the US midterm elections raised concerns about increased regulatory oversight and potential restrictions on the growth of AI data centers.
The Nasdaq Composite dropped 5.5%, while the Philadelphia Semiconductor Index fell more than 12%. Although technology-heavy Asian markets faced pressure on Friday, losses in Indian equities are anticipated to be comparatively limited. Foreign investors bought a net $1.6 billion in Indian equities on Thursday, the largest single-day purchase in nearly six years, according to preliminary exchange data.
This was followed by net purchases of around $2.2 billion over the preceding four sessions. The return of foreign capital could signal a more permanent shift in investor sentiment towards India, which will be crucial for the rupee's future trajectory along with oil prices, according to traders.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.