Probable outflows from local stocks from the portfolio roiled the rupee that day, traders said, while a rebound in hedging from exporters and periodic dollar sales from state-owned banks helped contain the decline.India’s stock indices, the BSE Sensex and Nifty 50, fell around 0.7% and 0.9% respectively, amid mixed price movements in regional stocks.
Foreign investors have sold a net of more than $1 billion worth of local stocks in December so far, bringing outflows to nearly $18 billion this year. Both the rupee and equities have underperformed regional benchmarks this year.
The rupee has fallen about 5% this year, making it the worst performing currency in Asia. The Nifty 50 is up more than 9%, but the gains pale in comparison to the 25% jump in MSCI’s gauge of Asian stocks outside Japan.
While foreign brokers have gradually turned positive on the prospects for local equities, analysts believe pressure on the rupee is likely to continue unless there is a breakthrough in US-India trade talks. A US trade delegation is expected to visit New Delhi this week for talks, an Indian government source said last week.
Asian currencies were mostly defensive, with the Indonesian rupiah leading the region’s biggest losses, while the dollar index held steady at 98.98 as investors awaited policy outcomes from the US Federal Reserve on Wednesday.
“The Fed could pose a positive event risk to the dollar as it appears difficult for the Fed to validate the 90 basis points of easing priced into Fed Funds futures in early 2027,” ING analysts said. The dollar index is down almost 9% on the year to date.
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