Indian Rupee posts modest gains, eyes on RBI's swap maturity, US bond yield, oil prices

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Nifty and Sensex eye a muted open on Thursday – Crypto News

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1 year ago

February 15, 2024

Dripp

India’s Nifty and Sensex eye a subdued start on Thursday, following an upbeat close on Wednesday.
Nifty and Sensex cheered positive European equities and softer Indian WPI inflation data.
Nifty and Sensex traders gear up for India’s trade data and a fresh batch of US statistics.

The Sensex 30 and Nifty 50, India’s key benchmark indices, are set to open on a flat to lower side this Thursday, after a positive close on Wednesday. Gift Nifty, rebranded from SGX Nifty, is trading 0.05% lower on the day, suggesting a muted open for Nifty and Sensex.

The Indian indices defied the early bearish sentiment, tracking the advance in their European counterparts amid a recovery in risk sentiment while softer India’s Wholesale Price Index (WPI) inflation data also added to the renewed optimism.

The National Stock Exchange (NSE) Nifty 50 index finished Wednesday at 21,840 while the Bombay Stock Exchange (BSE) Sensex 30 settled at 71,833. Both indices gained roughly 0.40% on the day.

Stock market news

Nifty and Sensex rebounded on Wednesday, courtesy of the solid recovery in the banking sector stocks.
The top five gainers on the Nifty were BPCL, SBI Bank, ONGC, Coal India and Tata Steel. Meanwhile, the top losers were Tech Mahindra, Cipla, Dr Reddy’s, Infosys and TCS.
Yubi, a credit platform, has entered a co-lending partnership with Axis Bank and Muthoot Microfin.
Indian automaker Mahindra & Mahindra’s standalone profit after tax rose 60.6%) in the three months to Dec. 31, missing analysts’ estimate.
Paytm shares fell to a fresh record low of Rs 342.15 after falling nearly 10% following the downgrade by the brokerage firm Macquarie. This came after the Reserve Bank of India’s (RBI) recent regulatory action against Paytm Payments Bank.
The Indian WPI inflation dropped to 0.27% in January, as against a 0.73% increase in December. The data missed the market consensus of 0.53%.
The Lunar New Year holidays in China could keep the liquidity thin around the Indian indices.
All eyes now turn toward the top-tier US Retail Sales report and India’s trade deficit data for trading impetus in Nifty and Senxex indices.
Following Tuesday’s hot US Consumer Price Index (CPI) data, markets are pricing in a no Fed rate cut in March and a lower than 50% chance of easing in May.

Indian economy FAQs

The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.

India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.

Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.

India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.