Indian Rupee: Expected To Stay Cautious

23 Feb 2022 , 09:21 AM

The Indian rupee is expected to stay cautious awaiting clarity on developments on Russia-Ukraine front. Besides, sustained foreign fund outflows, a lacklustre trend in domestic equities and elevated crude oil prices could continue weighing on investor sentiment.

On Tuesday, rupee depreciated by 31 paise to 74.86 against the US currency. At the interbank foreign exchange, the rupee opened at 74.71 against the American dollar but later dropped to a low of 74.99 against the greenback. The local unit was quoted at 74.86 at close, down 31 paise from the previous close.

Domestic equity benchmarks recovered from steep losses in early trade and ended with modest cuts on Tuesday. The S&P BSE Sensex fell 382.91 points or 0.66% to 57,300.68. The Nifty 50 index lost 114.45 points or 0.67% to 17,092.20. Foreign portfolio investors (FPIs) sold shares worth Rs 3,245.52 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 4,108.58 crore in the Indian equity market on 22 February, provisional data showed.

The escalating crisis between Russia and Ukraine, and the resultant surge in crude oil prices is worrisome, Finance Minister Nirmala Sitharaman said on February 22, adding that the government is constantly monitoring the situation. In post-Budget consultations with several stakeholders, Sitharaman said the Ukraine situation and the crude rates were discussed at the meeting of the Financial Stability Development Council (FSDC), which includes all the financial sector regulators.

Meanwhile, the government will go ahead with the upcoming initial public offering (IPO) of the state-run insurance giant LIC, Finance Minister Nirmala Sitharaman said on February 22, amid concerns raised over the potential fallout of the escalating tensions between Russia and Ukraine.

Overseas, Asian stocks are trading higher on Wednesday as investors continue monitoring the intensifying crisis surrounding Ukraine. Markets in Japan are closed on Wednesday for a holiday. Wall Streets main indices fell on Tuesday, with the S&P 500 confirming a correction, as the Ukraine-Russia crisis kept investors on the edge after Russian President Vladimir Putin recognised two breakaway regions in the country and ordered troops to the area.

US President Joe Biden said Tuesday Russia has begun ?an invasion? of Ukraine and announced sanctions against Russian banks and the countrys sovereign debt, among others. Bidens announcement came following the Russian parliaments approval of President Vladimir Putins Tuesday request to use military force outside the countrys borders.

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