Operation Sindoor's Impact on Indian Rupee

The Indian rupee experienced a significant drop, falling 31 paise to 84.66 against the US dollar during early trading on Wednesday. This decline comes in the wake of India's military actions against terrorist facilities in Pakistan and Pakistan-Occupied Kashmir, which have escalated border tensions.

Military Actions and Market Reactions

The Indian armed forces launched missile strikes on nine terrorist targets, including the Jaish-e-Mohammad centre in Bahawalpur and Lashkar-e-Taiba's facility in Muridke. These operations, conducted under Operation Sindoor, follow the Pahalgam incident that resulted in 26 civilian killings two weeks prior.

Currency market specialists have pointed out that these military actions against terrorist facilities have drawn attention to the potential impact of conflict escalation on the rupee.

Market Speculations and RBI's Role

"Whilst speculators and worried importers might purchase dollars, we anticipate the Reserve Bank of India (RBI) will intervene to prevent any significant rupee decline," stated Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Bhansali added, "We expect there could be some selling by FII in the equity markets though that could be subdued as they would want to wait for further news of escalation to filter down."

Global Market Indicators

The dollar index, measuring the US currency against six major currencies, increased by 0.30 per cent to 99.53. Meanwhile, Brent crude futures traded higher by 0.68 per cent at USD 62.57 per barrel.