The Indian rupee showed resilience on Friday, appreciating by 19 paise to reach 82.94 against the US dollar, thanks to the positive impact of India’s inclusion in the JPMorgan bond index. This move is expected to have significant implications for India’s debt market and global investors.
At the start of the day in the interbank foreign exchange market, the rupee opened at 82.75 against the US dollar and touched a low of 82.97 during the day. Ultimately, it settled 19 paise higher at 82.94 compared to the previous close of 83.13.
JPMorgan Chase & Co’s decision to include Indian government bonds in its benchmark emerging market index is seen as a catalyst for increased foreign investment in India’s debt market. Analysts anticipate a direct inflow of USD 20-25 billion in the debt market over the next 18-21 months as a result of India’s inclusion.
Dilip Parmar, a Research Analyst at HDFC Securities, noted, “The Indian rupee outperformed in the week gone and rebounded after three weeks of downfall after India’s bond inclusion in the Global Bond Index. Though the inflows will come next year, the sentimental impact has been seen on the local rupee.”
However, it’s worth noting that the sustained impact of this announcement may face challenges amidst a strong US dollar rally and foreign fund outflows from domestic equities, driven by a surge in short-term US bond yields. In the near term, the spot USDINR is expected to trade within the range of 83.15 to 82.60.
In other financial market developments, the dollar index, which measures the strength of the US dollar against a basket of six currencies, rose by 0.24% to 105.63. Additionally, Brent crude futures, the global oil benchmark, advanced by 0.79% to USD 94.04 per barrel.
On the domestic equity front, the BSE Sensex closed 221.09 points or 0.33% higher at 66,009.15, while the NSE Nifty declined by 68.10 points or 0.34% to 19,674.25. Foreign Institutional Investors (FIIs) were net sellers in the capital market on Thursday, offloading shares worth Rs 3,007.36 crore, according to exchange data.