While the rupee closed the day at another low point, narrowly missing the psychologically significant level of 80 to the dollar, Indian stocks experienced their largest single-day rise in nearly a month, reflecting global cues.
The Sensex and Nifty ended Monday’s trading session 1.41% and 1.43% higher, respectively, marking their best performance since June 21.
However, the stock market surge did not help the currency, as the flight to dollar assets continued amid global economic uncertainty and the US central bank’s relentless monetary tightening.
The rupee came within a whisker of the 80-mark versus the dollar, ending at 79.98 against 79.88 on Friday. To be sure, the currency broke through the barrier in the offshore and over-the-counter markets last week, but it has yet to break through in the spot market.
“Domestic stocks increased amidst positive global signals. Global markets were buoyant as a result of solid earnings, strong retail sales data in the United States, and lessening expectations of fast rate hikes by Fed. Additionally, the Chinese government’s actions to address the growing financial risks brought on by a declining real estate market improved investor mood, according to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd.
Commodity price declines and the progress of the monsoon have aided domestic market advances this month, according to Khemka.
“Progressive monsoon, ongoing results season, declining commodity prices, and anticipated improvement in rural demand have all contributed to domestic markets’ smart recovery from their lows. The Nifty increased by 5% in July and continues to trade well over the 16,000-point level. Even the mid- and small-cap indices have increased in July by 8.5 and 6 percent, respectively, he noted.
Investors will be following crude price movements closely, as a sustained drop in oil prices below $100 might assist boost the Indian rupee and calm domestic inflation.
Another analyst at the company, Anuj Choudhary, predicted that the rupee will trade between 79.20 and 80.80 in the coming sessions.
Undoubtedly, market observers predict that Indian equities would outperform better in the second half of the year.
“Slower topline growth is still a major concern. However, commodity prices have started to decline, which may help to protect margins, which are already reeling from severe cost pressures”, according to the research.
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