Indian Rupee: Sustained Foreign Fund Inflows To Support

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Revival in the Indian rupee is likely to persist through the beginning of the New Year 2022 on Monday, 03 January 2022 amid faith in the Indian markets by foreign investors. Easing crude oil prices could support although gains in the dollar over the weekend could limit gains in the local unit. The rupee rose by 13 paise to close at 74.29 against the US dollar on the last trading session of 2021, tracking positive domestic equities amid year-end dollar selling by banks and exporters.

The rupee, however, closed the 2021 year with overall losses of 122 paise or 1.67 per cent due to a rise in crude oil prices and firming up US bond yields amid expectations of rate hike by the US Federal Reserve to rein in inflation. The rupee had closed at 73.07 on December 31, 2020. The local unit on the last trading day of 2021 opened at 74.35 against the greenback at the interbank foreign exchange market and witnessed an intra-day high of 74.10 and a low of 74.38. It finally settled at 74.29, a rise of 13 paise. In the previous session, the rupee surged 29 paise to close at a more than one-month high of 74.42 against the US dollar. On a weekly basis, however, the domestic unit registered a gain of 74 paise. This is the second consecutive week of gain for the local unit. The rupee has also registered the first monthly gain in four months.

The gross GST (Goods and Services Tax) revenue collected in December 2021 stood at Rs 1,29,780 crore, which is slightly lower than the revenue collected in November. The gross GST collection in November stood at Rs 1.31 lakh crore. Domestic equity benchmarks ended with decent gains on the last trading day of 2021. The barometer index, the S&P BSE Sensex, rose 459.50 points or 0.80% to 58,253.82. The Nifty 50 index added 150.10 points or 0.87% to 17,354.05. Foreign portfolio investors (FPIs) bought shares worth Rs 575.39 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 1,165.62 crore in the Indian equity market on 31 December, provisional data showed.

Overseas, Asian stocks are trading mixed on Monday as trading in 2022 kicked off, with some major markets in the region closed. Markets in Australia, mainland China and Japan are closed on Monday for a holiday. U.S. stocks finished their final trading session of the year lower, capping off a record-setting 2021 that came despite the persistent headwinds of Covid-19.

Meanwhile, the dollar index dipped on Friday in quiet holiday trading, but was set to end 2021 with a gain of nearly 7% as investors bet the U.S. Federal Reserve will raise rates earlier than most other major economies amid surging inflation driven by COVID-19 stimulus initiatives. The dollar index, which measures the greenback against six major rivals, was at 95.89.

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