Rupee Set for Biggest Monthly Gain Since 2018 Amid Strong FII Inflows

Supported by a surge in foreign portfolio investment and easing dollar strength, the Indian rupee rallies over 2% in March, outperforming regional peers.

MUMBAI, March 28:
The Indian rupee is on course to record its strongest monthly gain since November 2018, fueled by robust foreign portfolio inflows, seasonal dollar sales, and easing of bearish positions on the local currency.

So far in March, the rupee has gained over 2%, significantly outperforming major regional currencies. On Thursday, the currency strengthened 0.2% to 85.5875 per U.S. dollar, with traders attributing the momentum to dollar selling by foreign and private Indian banks.

After hovering near record lows in mid-February, the rupee has staged a strong comeback, now trading flat for the year.

“It appears that USD/INR long positions are being unwound as custodial inflows have started to come in,” a salesperson at a large foreign bank told Reuters.

📈 Inflows Turn the Tide

Foreign investors purchased $1.2 billion worth of Indian equities on Thursday alone, pushing their six-day total to over $6 billion. Indian bonds also attracted $3 billion in inflows this month as investors prepare for a likely RBI rate cut in April.

The reversal in flows comes after several months of persistent outflows since October last year.

⚠️ Tariff Concerns on Horizon

However, analysts warn that upcoming U.S. tariff announcements could temper the rupee’s rally. The White House is expected to unveil new reciprocal trade duties on April 2, potentially impacting India.

India, in response, is reportedly planning to cut tariffs on more than half of U.S. imports to cushion the impact of the expected levies.

“Any adverse or aggressive tariff announcement will limit the room for further rupee gains,” noted DBS Bank in a research note.

With global trade developments and monetary policy decisions looming, market watchers will be keeping a close eye on the rupee’s trajectory heading into April.