The Indian Rupee (INR) declined on Monday as concerns over Foreign Portfolio Investment (FPI) outflows continued to weigh on the currency. Foreign investors have offloaded more than $11 billion in Indian stocks this year, exacerbating downward pressure on the INR.
However, a weaker US Dollar (USD) and potential intervention by the Reserve Bank of India (RBI) may help limit the Rupee’s depreciation. Additionally, lower crude oil prices—a key factor for India, the world’s third-largest oil consumer—could provide some support.
Key Economic Data in Focus
Later on Monday, markets will monitor the Chicago Fed National Activity Index for January. Investors will also shift their attention to US Gross Domestic Product (GDP) data for Q4, set for release on Thursday.
India’s Growth Outlook and PMI Data
GDP Growth: India’s economic expansion is projected to rebound in Q3 FY2024-25, with growth estimated at 6.2%, up from 5.4% in the previous quarter, according to the Union Bank of India.
Manufacturing PMI: The HSBC India Manufacturing PMI eased slightly to 57.1 in February from 57.5 in January.
Services PMI: The Services PMI surged to 61.1, up from 56.5 previously.
Composite PMI: Improved to 60.6 in February from 57.7 in January.
Pranjul Bhandari, Chief India Economist at HSBC, noted that global restocking continues to boost new export orders, with input costs easing and output prices rising, leading to higher margins, particularly for goods producers.
US Economic Indicators Weigh on USD
The US Composite PMI dropped to 50.4 in February from 52.7 in January.
Manufacturing PMI rose slightly to 51.6, exceeding expectations.
Services PMI declined to 49.7, missing the forecast of 53.0.
The University of Michigan Consumer Sentiment Index fell to 64.7, down from the expected 67.8.
USD/INR Outlook: Key Levels to Watch
Despite near-term consolidation, USD/INR maintains a positive bias, holding above the 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) around 50.0 suggests potential sideways movement or downside risks.
Resistance Levels:
- 87.00 (Psychological barrier)
- 88.00 (All-time high)
- 88.50 (Further upside target)
Support Levels:
- 86.35 (Low of February 12)
- 86.14 (Low of January 27)
- 85.65 (Low of January 7)
While FPI outflows continue to pressure the Rupee, USD weakness, RBI intervention, and lower oil prices could offer stability in the near term.
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