The Indian rupee today posted its biggest one-day gain against the US dollar in a year amid a strong recovery in domestic equities. The partially convertible rupee surged 0.6% to 79.45 per US dollar in its best session in a year. The currency had ended at 79.96 yesterday after hitting a record 80.12. Indian stock markets index Sensex soared over 1,500 points as investors returned to buying the dips after a recent selloff.
According to NSE data, FIIs bought Indian equities worth Rs 4,165 crore on a net basis today.
Domestic equities have seen foreign investor inflows of about $ 6 billion in August, the highest since December 2020. The dollar index today lost some steam after hitting a 20-year high in the previous session.
"Rupee gained strongly by 40 p as heavy short covering was witnessed in capital markets from FIIs. As benchmark rose 2.50% in Indian capital markets hence Going ahead 80.00 will keep acting as strong support for the rupee whereas 79.00 will be tested in the coming session," said Jateen Trivedi, VP Research Analyst at LKP Securities.
Hitesh Jain, Lead Analyst – Institutional Equities, YES SECURITIES, said that though the bias for the rupee remains on the downside, he does see a major downside as RBI remains committed to preserving the INR in a confined range. “Needless to mention, RBI’s war chest in terms of adequate FX reserves to counter the volatility in INR. Also, FII flows into Equities remain positive, while markets will derive courage from an imminent possibility of the inclusion of Indian Bonds in Global Indices," he added.
Indian government bond yields fell today, as sentiment was supported by the expectation of progress towards the inclusion of bonds in global indices.
The benchmark 10-year government bond yield ended at 7.1893% against 7.2534% yesterday. The yield fell 13 bps in August, after easing 13 bps in July.
In the previous session, the rupee had depreciated 7 p to close at 79.91 against the American dollar. The rupee fell to its all-time low of 80.15 against the US dollar in intra-day trade.
Goldman Sachs had said earlier this month that it expected India to be included in global bond indices in 2023, potentially leading to passive inflows of around $ 30 billion.