Indian rupee logs over 4 pc gain this fiscal amid headwinds on economic front


The Indian rupee has logged over 4 per cent gain so far this fiscal, as sustained foreign fund inflows and the RBI’s deft policy manoeuvring ensured a strong year for the Indian currency despite headwinds on the economic front, according to experts.
The local unit is likely to average around 73.50-74 in the financial year 2021-22, as despite a vaccine, the coronavirus hysteria still persists and may continue to grapple the foreign exchange market, experts said.
The financial year 2020-21 has been a roller-coaster ride for the rupee due to COVID-19. The pandemic-induced massive sell-off in the equity market led the rupee breach record low of 76.90.
However, the optimism over vaccines, easing of lockdown restrictions, infusion of stimulus by governments and central banks all over the world enthused investors with a general sense of optimism, and the rupee vaulted back to the 72 zone.
HDFC Securities Deputy Head (Retail Research) Devarsh Vakil said, “Despite headwinds on the economic front and larger-than-anticipated fiscal deficit, the RBI’s deft manoeuvring ensured lower yields for the G-secs and substantial accretion to forex (foreign exchange) reserves this year.”
He added that the rupee is up by 4 per cent against the US dollar for FY21 despite having much higher interest rates and inflation than the US.
Experts said sustained foreign fund inflows into India’s listed stocks ensured a strong year for the Indian currency.
For the current financial year, foreign investors have poured in USD 35.22 billion, the biggest inflows after 2014-15. India has attracted the highest-ever foreign direct investment (FDI) inflows at USD 67.54 billion during the first nine months of the financial year 2020-21.
Reliance Securities Senior Research Analyst Sriram Iyer, “The rupee movements were not surprising as Indian central bank took steps to stem the depreciation bias of the currency through monetary policy and intervening in the forex markets.”