Rupee's Resilient Rebound

The Indian rupee demonstrated a significant recovery, closing 17 paise higher at 85.41 against the US dollar on Friday. This rebound was attributed to potential interventions by the Reserve Bank of India (RBI) to mitigate excessive depreciation.

Market Dynamics and Geopolitical Influences

Opening weak at 85.88 per dollar amidst escalating tensions between India and Pakistan, the rupee's journey was tumultuous, fluctuating between 85.88 and 85.32 before settling. The currency had previously suffered its steepest single-day decline in over two and a half years, dropping 81 paise to close at 85.58 against the dollar.

Expert Insights

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, highlighted the rupee's initial weakness due to geopolitical tensions, weak domestic markets, and rising crude oil prices. However, a recovery was noted later in the day, spurred by RBI's dollar sales and a correction in the US dollar index.

Global and Domestic Factors

Despite the tensions, the dollar index weakened, offering some respite to emerging market currencies. Conversely, Brent crude's surge added pressure on the rupee through increased import costs. Choudhary cautioned about potential near-term pressures from crude prices and geopolitical uncertainties but noted possible support from FII inflows and de-escalation in border tensions.

Equity Market Reaction

Indian equities faced a downturn, with the BSE Sensex and NSE Nifty both recording losses. Despite this, FIIs emerged as net buyers in the equity market, injecting optimism amidst the prevailing uncertainties.