Rupee Holds Ground vs. US Dollar Amid Geopolitical Risks

The Indian rupee exhibited relative strength against the US dollar, even in the face of a significant surge in global crude oil prices. This resilience can be attributed to market expectations that the Reserve Bank of India (RBI) will undertake measures to prevent the local currency from depreciating to historic lows.

At the opening of the trading session, the Indian rupee showed a modest appreciation, starting 3 paise higher at 83.22 against the US dollar, compared to its previous closing rate of 83.25.

The Dollar Index, a metric that assesses the strength of the US dollar against a basket of six major currencies, experienced a notable uptick, registering a 0.26% increase to reach a level of 106.32. This surge in the value of the dollar can be attributed to several factors, with heightened concerns in the Middle East being a prominent driver.

In contrast to the US dollar’s strength in international markets, the Indian rupee exhibited a range-bound trading pattern, facing downward pressure due to the prevailing strength of the American currency and a pessimistic trend in domestic equities.

At the close of trading on Friday, the rupee remained relatively unchanged, settling at a rate of 83.25 against the US dollar. This level reflects a continuation of the rupee’s challenges in maintaining its value. Notably, the rupee had previously reached an all-time low of 83.29 in October 2022.

Brent crude futures, which serve as the global benchmark for oil prices, displayed a notable increase of 3.13%, reaching a price of $87.23 per barrel. This substantial uptick in oil prices can be attributed to a variety of factors influencing the global oil market.

Market sentiment has taken a delicate turn, as noted by Amit Pabari, the Managing Director of CR Forex Advisors. This shift in sentiment comes in the wake of recent clashes between Israeli forces and Hamas, which occurred over the weekend and coincided with an unexpected attack by militants on Israel. These events collectively mark one of the deadliest days of violence witnessed in the region in over fifty years.

Amit Pabari further noted that global tensions have led to a surge in demand for the safe-haven US dollar. Simultaneously, the vigilant stance of the Reserve Bank of India (RBI) has initiated a tug-of-war in the currency market.

The USD/INR currency pair is currently experiencing a significant trading pattern characterized by notable resistance at the 83.30 level and concurrent support around 82.80. This situation has created a scenario reminiscent of a tug-of-war in the market. According to Amit Pabari, a breakthrough of either of these pivotal levels could potentially lead to a substantial movement in the exchange rate, with an estimated range of approximately one rupee in either direction.

In the domestic equity market, the 30-share BSE Sensex witnessed a decline of 274.33 points, representing a decrease of 0.42%, settling at 65,721.30. Simultaneously, the broader NSE Nifty index experienced a decline of 84.10 points, equivalent to a decrease of 0.43%, closing at 19,569.40.

Foreign Institutional Investors (FIIs) were observed as net sellers in the Indian capital market on Friday, as per exchange data. They collectively offloaded shares with a total value of ₹90.29 crore. This information provides insights into the activity of foreign investors in the Indian stock market on that particular trading day.

India’s foreign exchange reserves experienced a notable decrease, declining by $3.794 billion to reach a level of $586.908 billion for the week ending September 29. This information was reported by the Reserve Bank of India (RBI) on Friday.

On Friday, there was a notable contrast in the trading activities of Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) in the Indian stock market, as reported by provisional data available on the exchanges:

• Foreign Institutional Investors (FIIs): FIIs were net sellers of Indian shares, offloading shares with a total value of ₹90.29 crore. This implies that FIIs sold more shares than they bought during the trading session. FIIs’ activity in the Indian market can be influenced by global factors, economic outlook, and market sentiment.
• Domestic Institutional Investors (DIIs): In contrast, Domestic Institutional Investors (DIIs) were net purchasers of shares, buying shares worth ₹783.25 crore. DIIs include various domestic entities such as mutual funds, insurance companies, and banks that invest in the Indian stock market. Their net buying indicates positive sentiment or investment activity within the domestic financial market.