Indian rupee to draw support from return of foreign flows amid tech meltdown
- The Indian rupee has advanced 0.5% so far this week, hitting a two-week high of 94.32 in Thursday's session before settling at 94.4750
The Indian rupee is strengthening due to significant foreign capital inflows, driven by a global tech stock rout and retreating oil prices, marking a potential reversal in investor sentiment.
- Foreign capital inflows boosting the Indian rupee's performance.
- Global tech stock rout shifting investment focus to India.
- US midterm election impact on oil prices and AI regulation.
MUMBAI: The Indian rupee on Friday will draw support from a return of foreign capital to Indian markets after months of sustained outflows, with a technology rout offering a tailwind for capital flows into Asia’s third-largest economy.
The Indian rupee has advanced 0.5% so far this week, hitting a two-week high of 94.32 in Thursday’s session before settling at 94.4750. It is expected to open largely flat, with a slight positive bias.
The Indian currency, which has remained under pressure for much of the year and relied heavily on central bank intervention for support, has found relief this week from two factors that had weighed on it for months — oil prices and equity flows.
Oil prices have retreated on expectations that the Republican Party’s losses in the US midterm elections could constrain President Donald Trump’s political room to sustain the conflict with Iran.
Meanwhile, foreign investors have been buying Indian equities, with the retreat from AI-linked technology stocks offering a potential boost to markets that had lost out amid capital chasing the AI trade.
The reversal in those trades is now bringing Indian equities back into focus. The technology rout intensified on Thursday after the Democratic Party victory in the US midterm raised concerns about greater regulatory scrutiny and potential curbs on the expansion of AI data centres.
The Nasdaq Composite plunged 5.5%, while the Philadelphia Semiconductor Index tumbled more than 12%. Technology-heavy Asian markets came under pressure on Friday. In comparison, losses in Indian equities were expected to be relatively contained.
Foreign investors bought a net $1.6 billion of Indian equities on Thursday, their biggest single-day purchase in nearly six years, according to provisional exchange data. This followed net purchases of about $2.2 billion over the previous four sessions.
Whether the return of foreign capital marks a more sustained reversal in investor sentiment towards India will be key for the rupee’s outlook alongside oil, traders said.