The Indian Rupee continued its downward slide on Friday, approaching its record low as negative performance in domestic equity markets and increased demand for the US Dollar from importers placed additional pressure on the currency. The upcoming release of India’s Federal Fiscal Deficit for October and GDP growth figures for the second quarter of FY25 is expected to influence market sentiment.
Factors contributing to the rupee’s decline include rising US Treasury bond yields and foreign portfolio investors retreating from Indian equities, resulting in increased selling pressure on the INR. Despite these challenges, the Reserve Bank of India is anticipated to intervene strategically in the forex market, selling US Dollars to stabilize the rupee amid ongoing global fluctuations.
Foreign investment flows revealed significant withdrawals, with investors pulling out approximately $1.4 billion from Indian equities on Thursday alone, exacerbating a 1.5% drop in the BSE Sensex index. Over the preceding month, about $11 billion had exited from Indian equity markets. However, growth forecasts for India’s GDP suggest it may meet the RBI’s target of 7.0% for the second quarter of FY25, providing a potential buffer against further declines in the rupee.
Analysts predict that India’s economy may experience its slowest growth in 18 months, driven by muted consumer spending, even as government expenditure rebounds. Additionally, the RBI’s decision on interest rates in its upcoming meeting is influenced by rising consumer inflation, indicating a cautious approach moving forward.
In the foreign exchange market, the USD/INR pair remains in a strong upward trend, maintaining levels above the crucial 100-day Exponential Moving Average. Current momentum indicators suggest that while support may hold, resistance levels around 84.50 – 84.55 could attract further buying interest, pushing the pair towards the psychological resistance of 85.00. Conversely, if trading remains below the trend channel’s lower boundary, retests of lower support levels may be on the horizon.
