Indian Rupee: Expected To Tumble In Opening Trades

27 Jan 2022 , 08:59 AM

The Indian rupee is expected to tumble in opening trades on Thursday, 27 January 2022 tracking broad strength in the dollar overseas. Besides, sustained foreign fund outflows from Indian markets amid weakening global risk appetite after Fed signalled a rate hike could be coming soon could add further pressure on the local currency. Moreover, crude oil staying at higher levels is also expected to remain unsupportive for the domestic unit.

On Tuesday, rupee depreciated by 16 paise to close at 74.76 against the US dollar. At the interbank foreign exchange market, the local currency opened at 74.60 against the greenback and witnessed an intra-day high of 74.57 and a low of 74.80 during the session. The rupee finally settled at 74.76, down by 16 paise over its previous close of 74.60. This is the second straight session of loss for the local unit.

Domestic stocks and forex markets remained closed on 26 January 2022 on account of Republic Day. The benchmark indices advanced on Tuesday, snapping a five-day losing streak. The barometer index, the S&P BSE Sensex, jumped 366.64 points or 0.64% at 57,858.15. The Nifty 50 index advanced 128.85 points or 0.75% at 17,277.95. Foreign portfolio investors (FPIs) sold shares worth Rs 7,094.48 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 4,534.53 crore in the Indian equity market on 25 January, provisional data showed.

Build up to the upcoming budget session would be the key event that the market would be looking for in the near future. The Budget session of Parliament is set to commence on January 31 and will conclude on April 8. The government will present the Budget for fiscal 2022-23 on February 1. The Economic Survey is likely to be tabled on January 31 after the presidents address, as per reports. Investors will also continue to monitor the situation surrounding the omicron COVID-19 variant.

Meanwhile, the International Monetary Fund (IMF) has raised its forecast for growth in Indias gross domestic product (GDP) in FY23 by 50 basis points (bps) to 9%. Indias GDP growth forecast for FY24 was also raised by 50 bps to 7.1%. Explaining the upward revision in an update to its World Economic Outlook report, the IMF said it expects an improvement in Indias credit growth which would boost consumption and investment and better-than-anticipated performance of the financial sector.

Overseas, Asian stocks are trading lower on Thursday as investors digest an overnight update from the U.S. Federal Reserve that indicated the central bank plans to raise interest rates as soon as March. U.S. stocks fell on Wednesday after the Federal Reserve signaled an interest rate hike could be coming soon, while supply concerns stemming from tension between Russia and Ukraine saw oil prices touch highs not seen since 2014. The Federal Reserve on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.

Meanwhile, the dollar index held above 96 against a basket of currencies, having touched a months high of 96.61, after the Federal Reserve left monetary policy unchanged, but said it would be appropriate to raise borrowing costs soon to tame inflation amid a strong labor market. The central bank also said it would be ending its bond purchases that month as well as start reducing its asset holdings significantly after the liftoff in interest rates.

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