Rupee Gains Ground as RBI Policy Maintains Stability Amid Global Uncertainty

The domestic currency strengthened by 50 paise following the central bank's latest monetary policy announcement.

The Indian rupee witnessed a notable recovery against the US dollar on Friday, climbing 50 paise to reach an intraday high of 95.24. This upward movement followed the latest rbi policy announcement, where the central bank moved to reassure investors regarding the country's robust forex reserves, which are currently viewed as a significant buffer against potential external financial volatility.

Stability in Monetary Stance

Governor Sanjay Malhotra, while unveiling the second bi-monthly monetary policy for the current fiscal year, confirmed that the Monetary Policy Committee has opted to keep the repo rate steady at 5.25 per cent. The decision reflects a neutral stance, carefully balancing the ongoing concerns surrounding supply chain disruptions and the elevated cost of energy linked to the crisis in West Asia.

Regarding the currency’s valuation, the Governor clarified that the central bank remains committed to its existing exchange rate framework. The rbi does not target any specific band for the rupee, choosing instead to allow market forces to dictate its movement while maintaining overall financial equilibrium.

Shifts in Investment and Growth Forecasts

Beyond the status quo on interest rates, the central bank introduced measures to increase the investment limits for Non-Resident Indians and Overseas Citizens of India in various equity instruments. However, the broader economic outlook saw some adjustments; the rbi has revised its GDP growth projection for the current fiscal year to 6.6 per cent, down from the previous forecast of 6.9 per cent. Simultaneously, the CPI inflation estimate has been nudged upward to 5.1 per cent for FY27.

Market Reaction

While the currency found support, the domestic equity market saw a more cautious reaction. The Sensex shed 142.06 points to settle at 74,217.95, while the Nifty slipped by 38.75 points. Investor sentiment was also impacted by data showing that foreign institutional investors were net sellers, offloading equities worth Rs 4,447.06 crore during the previous trading session.

As the greenback hovered at 99.40 on the dollar index, global oil price benchmarks also remained in focus, with Brent crude trading higher at USD 95.37 per barrel. Investors continue to monitor how these global factors will influence the performance of major financial entities and the broader domestic share landscape in the coming weeks.